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Ellies Holdings LTD
1
Ellies Head Office, Village Deep, Johannesburg.
Annual Report 2009
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contentsGroup Profile
Mission Statement
Trusted Product Range
Capitalising on Synergies &Vertical Integration
Product Overview
Ellies Corporate Services
Ellies Power Products / Megatron
Manufacturing & Engineering
Packaging & Marketing
Distribution & Logistics
Chairman’s Statement
Chief Executive Officer's Review
Corporate Governance
Ellies Holdings Directorate
Ellies (Pty) Ltd Directorate
Annual Financial Statements
Shareholder Spread
Notice of Annual General Meeting
Form of Proxy
Corporate Information
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Ellies Holdings LTD
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Group Profile
'Ellies' and 'ElSat' have become household brands and the group continues to expand its product range which now includes audio, telephone and electrical accessories. The Group's revenue is derived from the manufacture, import and distribution of TV and video equipment-related products under the 'Ellies' brand and from the manufacture, import and distribution of satellite and associated equipment under the 'ElSat' brand.
Ellies listed on the Alternative Exchange of the JSE Limited on 5 September 2007. As the dominant distributor of TV aerials and installation equipment to the retail, furniture, hardware and independent market, Ellies is ideally situated to capitalise on ever-increasing demand for these products in South Africa and to introduce new offerings to its extensive and diversified customer base.
Megatron Federal
Megatron Federal was founded in 1999 and acquired by the Ellies Group in May 2008. Based in Johannesburg and operating from 5
2production facilities in Chloorkop (10 000m ), the company specialises in the fields of power generation, transmission and distribution.
Over three decades, Ellies has become a leading southern African manufacturer, wholesaler and distributor of electronic products related to television reception, including satellite and terrestrial aerial ranges. The group is also a market leader in domestic electrical and industrial audio products, and a major importer of associated products.
Between inception in 1979 and the early 1990s, Ellies focused largely on TV aerials, accessories and spare components, and then broadened its range to include remote controls and other related accessories, expanding its customer base in the process.
In 1995, with the advent of satellite TV in the South African market, the group founded the ElSat business. ElSat pioneered the pre-paid installation voucher system, which has become the national industry benchmark – a seamless process from point of sale to installation in a consumer's home, facilitated by the Ellies call centres.
While the product range has broadened exponentially over the years, the focus remains unchanged: providing a single, convenient and efficient source of supply for its customers – from leading retailers to independent outlets and installers.
Ellies has trading divisions in all major centres throughout South Africa as well as Windhoek and Gaborone.
NAMIBIANAMIBIA
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PORT ELIZABETHPORT ELIZABETH
UPINGTONUPINGTON
A Division of Ellies (Pty) Ltd
Annual Report 2009
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Ellies has over 10 000 individual products in its range, from terrestrial antennae and satellite equipment to television, audio, domestic electrical and telephone accessories. In addition, Ellies distributes and rents premium-quality electrical capital equipment under the 'Ellies' brand, and satellite and associated equipment under the 'ElSat' brand.
The Ellies range has recently been expanded to include power-generation products such as generators and power inverters. The acquisition of Megatron Federal in 2008 adds power management, electrical switchgear and mini-substation manufacture and supply – this is expected to become a key component of the group, especially as exports to Africa soar.
Trusted product range
We at Ellies endeavour to:
?put a human face on our operations and continually enhance confidence in our products and services.
?provide value to customers through providing useful products, engineered to exceptional standards.
?be socially responsible and remain mindful of all stakeholders' interests.
Mission Statement
One of Ellies sales divisions.Ellies internal sales staff member. Ellies Merchandised Products.
Capitalising on Synergies &Vertical Integration
Ellies Holdings LTD
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Ellies controls its product from manufacture, in most instances, to on-the-shelf delivery. By controlling the packaging, marketing, sales and distribution of both its own manufactured and imported products, Ellies meets its promise of timely, professional service to the customer and consistent, affordable quality for consumers.
Group operations span 14 focus areas:
Manufacturing and engineering:
?Aluminium and plastics manufacturing.
?Electronics manufacturing.
?Light metal engineering.
Manufacture, import and distribution of:
?Terrestrial television reception products.
?Satellite television reception products.
?Ellies electrical and surge-safe products.
?Ellies audio equipment and accessories.
Group services:
?Ellies Corporate Services.
?ElSat full maintenance finance and rentals.
?Packaging and marketing.
?Sales and merchandising.
?Distribution/logistics.
Import, distribution and installation of:
?1kVa to 2mVa generators (petrol and diesel).
?120 to 1200W power inverters.
Megatron Federal:
?Power management, electrical switch-gear and mini-substation manufacture and supply.
?Large power generation.?Facilities management and maintenance.
Ellies Power Products:
?Turnkey electrical project engineering and design solutions for low, medium and high voltage electrical systems.
?Installation and commisioning of low, medium and high voltage equipment.
Annual Report 2009
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Ellies Holdings LTD
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Product Overview
Terrestrial TV reception products
TV antennae, related amplifiers and signal-distribution products are manufactured and distributed from the Ellies ISO 9001:2008 certified production facility in Johannesburg.
Accessories
Ellies manufactures, imports and distributes a range of electronic telecommunications and related accessories including land-line telephone and computer accessories, electronic components for the independent repair and service maintenance market.
Security
From wireless and fixed-cable security products to a range of door chimes and intercom doorbells.
Remotes
The group imports, manufactures and distributes a wide range of universal remote controls and remote control extenders, including the popular 'Remote Blaster'.
Satellite TV reception products
ElSat is the largest distributor of satellite equipment in southern Africa, facilitating installations nationwide through its call centres and established relationships with reputable independent installers who benefit through the pre-paid installation voucher system pioneered by Ellies. ElSat manufactures and imports the two popular dish sizes and imports the wider-sized range, and has become the largest distributor for the pay-TV groups. ElSat is a low-margin business balanced by low overheads and high-volume sales.
Electrical and surge-safe
The group manufactures its own range of power inverters specially designed to work in extreme African conditions. In addition, domestic electric products such as plugs, extension cords and surge-safe protectors are manufactured and distributed to most leading retailers and independent outlets. Ellies provides generators – from 1kVa petrol units to 2mVa diesel units – for both domestic and commercial use.
Annual Report 2009
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Ellies Corporate Services
This is one of our fastest-growing focus areas. It offers a wide range of group services to the corporate market, namely casinos, hotels, residential complexes (multi-unit dwellings), hospitals, restaurants, retailers and shopping centres. It also supplies industrial audio and video/audio door-phone distribution systems. This offering includes design and project management of installation and supply of TV, satellite and other equipment – a managed project from conception to conclusion for clients that include leading hospitality, construction and property development groups.
Audio equipment and accessories
Industrial audio – Ellies Audio designs, supplies and installs industrial audio systems which include a range of high-quality industrial audio products such as amplifiers and ceiling-, column- and wall-mounted speakers for all environments.
Audiovisual accessories – the range includes audiovisual cables, plugs, headphones, speaker brackets and mounts for projectors, plasma screens, TVs and liquid crystal displays (LCDs). Ellies is also the appointed agents for the Sanus range of brackets and mounts.
ElSat Rentals
ElSat Rentals is another rapidly growing focus area, and facilitates the full maintenance rental of TV reception equipment, audio equipment, video/audio, intercom and access control systems, including installation and maintenance. Rental and maintenance agreements are provided predominantly to townhouse complexes, private users, businesses and shopping centres countrywide. Offerings include rent to own, monthly and daily power generator rentals.
Ellies Holdings LTD
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Ellies Power Products / Megatron Federal
Ellies Power Products is based in Johannesburg, South Africa with 9 sales executives located throughout Southern Africa. Megatron Federal, our manufacturing unit, operates from 5 production facilities in Chloorkop, Gauteng.
The inspiration behind creating Ellies Power Products was to establish a sales and marketing division, staffed by qualified sales personnel, to aggressively market and service the entire southern African region, to become acknowledged as the preferred supplier of M.V. switchgear used in the electrical industry, by using Ellies (Pty) Ltd's existing infrastructure we can offer delivery and back-up of all our products throughout the region. Ellies Power Products is also a supplier of a wide range of quality ancillary equipment and materials used in the medium voltage, H.V. industry and OHL reticulation.
Utilising over 200 specialised personnel in the manufacture and repair of medium voltage switchgear, Megatron Federal is the original equipment manufacturer (OEMs) for the Hawker Siddeley vacuum switchgear and spare parts supply.
Megatron manufactures the following items:
?Transformer substations;
?Medium voltage withdrawable switchgear;
?Diesel generators;
?Sheet metal products for the M.V. electrical industry.
Key products imported and distributed:
?SF6 Medium voltage switchgear up to 36kV;
?Power transformers;
?Overhead line hardware;
?Test equipment and tools;
?Power transmission projects;
?Ancillary equipment.
Key services offered:
?Turnkey electrical project engineering and design solutions for low, medium and high voltage electrical systems;
?Installation and commissioning of low, medium and high voltage equipment.
A Division of Ellies (Pty) Ltd
Production facilitiesat Megatron Federal
2MVA Power Plant assembled for DRA-Nkomati
STD Type Bmini Substation
Annual Report 2009
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Manufacturing & Engineering
Ellies has a dedicated R&D department with experienced engineers, which holds patents for many of its manufactured products. The engineering, design and production facility adheres to global standards, with some plants now certified to ISO 9001:2008 levels. The facility comprises three key manufacturing divisions:
Aluminium and plastics manufacturing
Product development and manufacture of antennae using specialised machinery.
Light metal manufacturing
Manufactures furniture, computer stands, wall brackets, TV, VCR, LCD and plasma mounts, shelving, satellite and terrestrial mounting brackets and satellite dishes in an advanced light metal-fabricating plant. Ellies manufactures its own satellite dishes and support bracketry, catering for both coastal and inland conditions by using steel, stainless steel and galvanised materials. Ellies has its own tool and die manufacturing capabilities and powder coating plant, ensuring self-sufficiency. The group also has its own screen-printing capability, giving it the flexibility to meet the requirements of original equipment manufacturers (OEMs) to which it exports products. Recently the company also completed the installation of a galvanizing plant that will enable it to have more control over its manufacturing volumes and costs.
Electronics manufacturing
The plant incorporates advanced manufacturing facilities for surface mount devices (SMDs), amplifiers, remote extenders, video senders and other related electronic products using 'pick and place' SMD machines. Ellies manufactures a large range of internationally renowned remote control extenders under its own brand name 'Remote Blaster'.
CNC Punching Machine.
GalvanizingPlant.
CNC BendingMachine.
Ellies Holdings LTD
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Packaging & Marketing
Ellies has one of the largest packaging plants in the country, with specialised facilities including cryovacing and plastic blister packaging. An in-house marketing division creates and implements innovative strategies to ensure continued growth and brand awareness. Artwork for packaging and promotions is designed by the in-house art department.
The sales force comprises over 170 sales representatives, managers, product knowledge representatives and merchandisers throughout southern Africa. The group's six key customer areas are:
? Retail chain stores;
? Furniture chain stores;
? Hardware chain stores;
? Independent stores;
? Exports;
? Corporates.
Fully stocked Trade Counters countrywide cater for small independent installers without storefronts. Each Ellies branch has a dedicated telesales department responsible for tending to customer needs and processing orders. Services include pre-paid installation satellite voucher co-ordination.
Sales & Merchandising
Ellies in-storedisplays.
Lighting solutionsdisplay.
Blisterpack staff member sealing blisters.
Annual Report 2009
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Distribution & Logistics
The group maintains extensive warehousing throughout Southern Africa to ensure 'just-in-time' deliveries to customers. These warehouses store products manufactured by the group as well as imported goods, with sufficient inventory to best meet orders processed.
Ellies operates its own vehicle fleet and uses courier services that specialise in deliveries to retail, furniture chains and independents in rural areas.
Most goods are delivered to customers anywhere in Southern Africa with a 48-hour turnaround, with extensive container-loading facilities for expediting export orders. The company's forwarding and clearing agents have staff on site at head office.
Ellies warehousing facilities, Johannesburg.
Ellies Holdings LTD
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Chairman’s Statement
The global recession has put many companies through their paces, compelling companies to adopt new strategies and giving rise to an unprecedented sales resolve. Environments such as those seen in the past year demand a heightened awareness of new opportunities, solid infrastructure and extraordinary strength in management.
Overview
Our results are a representation of the company's resilience and solid 30-year history which have seen us through undeniably the most challenging economic climate in decades. From inception in 1979, we have grown to become the leading southern African manufacturer, wholesaler and distributor of electronic products related to television, as well as domestic electronic and audio products, and a major importer of associated products.
The year saw the group reach several significant milestones amongst which were our further expansion into Africa through representation in Zambia and Zimbabwe, the successful rollout of Multichoice's DSTV offering through furniture retailers and the establishment of Ellies Power and commercial electrical divisions. Megatron Federal, acquired effective May 2008, exceeded the forecast net profit after tax of R23.56 million. In addition, the conditions precedent of the acquisition of Ellies Botswana (Ellies and Elsat Botswana) were met during October 2008.
Ellies Power Products
Since the acquisition of Megatron Federal, we have identified the need to expand the division's sales function using the current infrastructure of the Ellies branches. This year we launched the Ellies Power Products division, employing qualified engineers in the medium voltage industry to market products manufactured by Megatron Federal, as well as relevant ancillary products, into the medium
voltage market throughout southern Africa and the SADC region. The division has already proved successful in all regions, being awarded annual tenders including the Mossel Bay, George and Swartland municipalities. The potential for Ellies Power Products has far exceeded what we expected. The team will continue differentiating itself by offering a more diverse product range, committing to exceptional customer service and utilising our national infrastructure to obtain additional contracts.
Ellies Commercial Electrical
Launched in July 2009, the commercial division aims to bridge the gap between infrastructural and domestic electrical products. The products sold through this division include circuit breakers and DB boards, supplied in bulk and blister packs for wholesale and retail customers. The commercial division will become a one- stop-shop for large electrical products and is poised to capitalise on the expected increase in government subsidised housing.
Ellies Essential Lifestyle
This division will include a fast moving lines which we will supply to our existing customers base. The products range from low to medium-end electrical products such as irons, kettles and toasters. The products are sourced from manufacturers and will be distributed through our existing branch network.
Digital Migration and Installer Academy
Broadcasting Digital Migration (BDM) is the process of converting television broadcasting signals from analogue to digital technology. Currently, analogue broadcasting is the means of delivery of terrestrial television in South Africa. BDM in South Africa will see an estimated 9 million television households needing Digital Terrestrial
Ellie Salkow
Annual Report 2009
14
Television (DTT) Set Top Boxes (STB's), to convert the digital terrestrial signal so that it can be displayed on analogue television sets. In July 2009 we announced a joint partnership with Altech UEC to provide a full service offering for digital migration in Southern Africa. The partnership will entitle Ellies to be the sole distributor of DTT STB's manufactured by Altech UEC and involves the distribution and installation of the STB's, including after sales services to retail.
A significant element of this agreement is the establishment of a training centre to aid unemployed and disadvantaged individuals, namely the 'Ellies Installer and Repair Academy'. These installer schools, set up around the country at Ellies branches, will train unemployed people in the installation of aerial and satellite systems, first level STB fault diagnostics and repair skills, and business and life skills.
Once the installers are established in their specific areas, they will receive continued support through the Ellies voucher system and will be able to develop sustainable businesses by building a reputation that enables them to add other products to their service offering. An additional benefit for the rural community will be to have local repair expertise in closer proximity to their homes.
Prospects
We will continue to grow our presence in the electrical industry through expansion of our product offerings including light commercial products. The lower LSM group have become a strong market for Ellies, with the persistent desire for information and entertainment, resulting in increased demand for Multichoice's DSTV offerings, the infrastructure for which, is sold and installed by Ellies. Export of Megatron Federal, satellite and DDT products into Africa has been further boosted by the establishment of representation through agents in Zambia and Zimbabwe. Additional agents in Kenya, Angola and Tanzania are to be established in the coming months. These agents, together with the High Definition and Digital Product
advances, will help to hedge against much of the effects of the erratic local trading environment.
Though trading conditions and the current economic environment may prove trying in the coming months, the diversity of our products and customer base place us in a good position to overcome difficult conditions. We remain confident with regard to the group's continued organic development and growth opportunities, with a strong focus on the benefits of improved capacity utilisation by maximising cross-selling opportunities between divisions, thereby providing improved front-to-end services to our customers.
Acknowledgments
During the year we appointed Ryan Otto to the board as an executive director, as well as Malcolm Goodford who joined us an independent non-executive director on the board. We welcome them and are confident they will be significant assets to the group.
In such difficult times we are reminded of the importance of a loyal and hard working team. I would like to thank each one of our people, in all divisions, for their tireless commitment. It is through their efforts that we able to make the group what it is. Similarly, my appreciation goes to my fellow directors, our executive management team, partners, advisors, suppliers and stakeholders for their ongoing contribution.
Elliot Salkow - Chairman
08 October 2009
“Our results are a representation
of the company's resilience
and solid 30-year history....”
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Chief Executive Officer’s Review
Though trading conditions for the group have changed in response to the worldwide recession, we are pleased to have achieved these results, which we attribute to our solid background, dedicated employees and ability to adapt to changing times. We place great emphasis and pride ourselves on our strategy to control a complete cycle of packaging through to marketing, and sales to distribution, of both our own manufactured and imported products.
Results
The results presented comprise the historical business of Ellies for the year ended 30 April 2009, together with the results, since date of acquisition, of the businesses of Megatron Federal and Ellies Botswana.
The group performed well overall, maintaining growth in revenue and profitability and we are confident that a good foundation has been laid to drive future growth. Revenue increased 39% to R977 million, driven by the acquisition of Megatron. EBITDA increased 37% to R131 million, with core headline earnings improving by 28% to R79 million. Headline earnings per share (HEPS) of 26.42 cents (2008: 30.60 cents) and diluted HEPS of 24.08 cents (2008: 30.45 cents) were achieved. The cause of the disparity between HEPS and fully diluted HEPS was as a result of the timing of the listing and the capital raising during the 2008 financial year.
The group ended the year in a healthy position with a 8.6 times interest cover of EBITDA and cash flows from operations being positive. Working capital management remained front of mind. During the year working capital increased by R76m. By the very nature of our business and our customer base it is necessary to carry high stock levels. Risk of stock redundancy however remains low due to reasonably high stock turnover. New provisional tax legislation
resulted in a 2008 provisional tax top up payment and higher 2009 provisional tax payments totalling R47m. These are fully paid up and were financed internally.
Operational Overview
Pressure on consumer spending did not substantially affect sales of Ellies electrical and consumable products. The local satellite television market continued to increase, with the largest demand for MultiChoice's DSTV offerings coming from the lower LSM population, through furniture stores nationally. Our call centre in the satellite television products division was expanded to accommodate the increased influx of satellite related orders. We experienced a shortage of available satellite decoder stock in the last four months of the financial year which impacted materially on revenue and profits for the group. Stock availability resumed in April 2009 and with demand for satellite television continuing to increase, we expect all lost unit sales to be recovered in the coming months.
The electrical products division continued to increase market share through the establishment of new products lines, new customer listings and OEM packaging. Ellies now OEM packages for Spar and Build It.
Megatron Federal achieved its forecast net profit after tax target despite projects delays experienced in the mining sector. With the recent recovery of resource prices, we expect these projects to come back on line, resulting in a strengthening of the division's order book. The initial cash payment resulting from the acquisition of Megatron and the further cash payments to the Ellies vendors of R28 million were funded from additional bank facilities. An additional amount is payable in shares and cash as the business achieved in excess of a warranted profit.
Wayne Samson
Annual Report 2009
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Outlook
Though it may be premature to predict an immediate improvement in trading conditions, locally we expect the growth in the country's electrical infrastructure to continue as per government's planned initiatives.
The current economic climate has resulted in a consolidation of certain suppliers and margins remain under pressure. Ever changing technology developments have however created new opportunities in the market, amongst others HD and DTT. The 2010 FIFA World Cup is also expected to further stimulate sales in the industry.
Satellite and DTT
The satellite market holds significant growth prospects for the group. With the consumer's desire to connect to the international community as a source for information, sales in the satellite market are expected to continue unabated. The digital migration will not only see a growth in the aerial sector but will also drive satellite sales into areas where digital terrestrial signal is not available.
Ellies will continue its drive of satellite into sub Saharan Africa, assisted by new offerings that will become available in the latter part of 2009.
The increase in demand for television reception related products is expected to be positively impacted by the imminent international migration to digital terrestrial television. We will continue to focus on consolidating our position around DTT through our partnership with Altech UEC, using our proven distribution methods and market position as the largest manufacturer, wholesaler and distributor of electronic products related to television reception, including satellite and terrestrial aerial ranges, in southern Africa.
Power Products and Ellies Commercial Divisions
The recently launched Ellies Power Products and Ellies commercial divisions are poised for growth through strategic focus on a major drive in South Africa via our national infrastructure of sales for Megatron and other related products. We will also drive the offering
through our established agents in Zambia and Zimbabwe and the additional agents to be set up in Kenya, Angola and Tanzania.
Corporate
Ellies corporate division has entered into the fibre optics field, with sole distribution rights of Foxcomm systems. This places the company well with the launch of IPTV into hotels and the roll out of triple play solutions.
Strategy
When considering growth options, Ellies benefits from economies of scale through improved capacity utilisation which results in no additional overhead and fixed costs being incurred. We aim to keep expanding our manufacturing divisions and increasing our presence in retail outlets with increased points of presence (POP's). We will also be focused on increasing our participation in government tenders and contracts during the next financial year. DTT holds particular potential and we are well positioned to capitalise on the migration to digital television and the government's subsidised DTT scheme.
We continue to carefully consider options for funding growth, taking into account the potential benefits of equity versus debt in every situation. Our overall objective is to maintain a healthy asset to liability ratio and make prudent funding decisions in the best interest of all stakeholders.
Appreciation
My appreciation goes to every member of the Ellies team, for their continued efforts and contribution to the group's development and success.
Wayne Samson - Chief Executive Officer
08 October 2009
“We continue to secure our future by
continuously looking for
opportunities in the TV, Satellite
and Electrical sectors...”
Ellies Holdings LTD
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Corporate Governance
Ellies is fully committed to ensuring compliance with the principles of the Code of Corporate Practices and Conduct set out in King II. The directors recognise the need to conduct the enterprise with integrity and in accordance with generally acceptable corporate practices. This includes timely, relevant and meaningful reporting to shareholders and other stakeholders, providing a proper and objective perspective of the company and its activities.
The directors have, accordingly, established mechanisms and policies appropriate to the company's business in keeping with its commitment to best practices in corporate governance to ensure compliance with King II. The board reviews these from time to time.
The formal steps implemented in this regard include the following:
Board of directors
The board comprises five executive directors and three non-executive directors, one of whom is considered independent. The board ensures there is an appropriate balance of power and authority so that no one individual or block of individuals can dominate its decision taking.
The non-executive directors are individuals of calibre and credibility. They have the necessary skills and experience to bring judgment to bear independent of management on issues of strategy, performance, resources, transformation, diversity and employment equity, standards of conduct and performance evaluation.
The information needs of the board are reviewed annually and directors have unrestricted access to all company information, records, documents and property to enable them to discharge their responsibilities sufficiently. Efficient and timely methods of informing and briefing board members prior to board meetings have been developed and steps taken to identify and monitor key risk areas, key performance areas and non-financial aspects relevant to Ellies operations. In this context, directors are given information on key performance indicators, variance reports and industry trends.
The board has an orientation programme to familiarise incoming directors with the company's operations, senior management and its business environment, and to induct them in their fiduciary duties and responsibilities. Directors receive further briefings from time to time on relevant new laws and regulations as well as on changing economic risks. New directors with no or limited board experience receive development and education to inform them of their duties, responsibilities, powers and potential liabilities.
The board appraises the chairperson's performance annually or on a basis it deems appropriate.
The chairperson, or a sub-committee appointed by the board, appraises the performance of executive directors at least annually.
All directors are subject to retirement by rotation and re-election by Ellies Holdings' ordinary shareholders at least once every three years in accordance with the company's articles of association.
The board has adopted a charter setting out its responsibilities
including adoption of strategic plans, monitoring operational performance and management, determining policy and processes to ensure the integrity of the company's risk management and internal controls, communication policy and director selection, orientation and evaluation.
Board meetings are held at least quarterly, with additional meetings convened when required.
The board sets the strategic objectives of the company and determines investment and performance criteria. It is also responsible for the proper management, control, compliance and ethical behaviour of the businesses under its direction. The board has established committees to give detailed attention to certain of its responsibilities. These operate within defined, written terms of reference.
The board evaluates its own performance from time to time.
Appointment of directors
Board appointments are conducted in a formal and transparent manner by the board as a whole.
A board directorship continuity programme will be established and maintained to review the performance and succession planning of executive directors and continuity of non-executive directors.
Audit committee
The board has established an audit committee which comprises only non-executive directors, including a representative of the designated advisor (Java Capital). The majority of the members are financially literate. The committee's primary objective is to provide the board with additional assurance regarding the efficacy and reliability of the financial information relied on by the directors, to assist them in the discharge of their duties. The committee provides assurance to the board that adequate and appropriate financial and operating controls are in place; that significant business, financial and other risks have been identified and are being suitably managed; and that satisfactory standards of governance, reporting and compliance are in operation.
Within this context, the board remains responsible for the group's systems of internal financial and operational control. The executive directors are charged with the responsibility of determining the adequacy, extent and operation of these systems.
Responsibilities of the committee include:
?Monitoring proposed changes in accounting policies;
?Advising the board on the accounting implications of transactions;
?Reviewing internal audit related functions and recommending the re-appointment of the external auditors for approval by shareholders at the Annual General Meeting;
?Assessing adherence to controls and systems within the company and, where necessary, recommending and monitoring improvements during the year;
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18
?Monitoring and appraising internal operating structures and systems to ensure that these are maintained and continue to contribute to the ongoing success of the company.
?The committee has fulfilled its duties during the year in accordance with its written terms of reference.
?The audit committee meets at least twice a year. Executives and managers responsible for finance including the external auditors, attend meetings as invitees.
?The audit committee is required to authorise engagement of the external auditors for any non-audit services by the appointed external auditors or by any other practising firm of auditors. Information (as well as amounts paid) relating to non-audit services from the appointed external auditors of the company is disclosed in the notes to the annual financial statements.
Risk management and internal controls
The objective of risk management is to identify, assess, manage and monitor the risks to which the business is exposed.
The most significant risks faced by Ellies are the possibility of termination of its supply contracts, various macro-economic conditions, competitors within the industry, a lack of specialised skills and foreign currency risk.
Furthermore, the level of borrowings and the exposure to interest rate movement is carefully monitored and covered.
Where relevant and with assistance from expert risk consultants, risks are assessed and appropriate insurance cover purchased for all material risks above pre-determined self-insured limits. Levels of cover are re-assessed annually in light of claims experience and events affecting the group, internally and externally.
To enable the directors to meet these responsibilities, management will implement systems of internal control, comprising policies, procedures, systems and information to assist in:
?safeguarding assets and reducing the risk of loss, error, fraud and other irregularities;
?ensuring the accuracy and completeness of accounting records and reporting;
?the timely preparation of reliable financial statements and information in compliance with relevant legislation and generally accepted accounting policies and practices.
Remuneration committee
The remuneration committee is mandated by the board to set the remuneration and incentivisation of all employees, including executive directors. In addition, the remuneration committee recommends directors' fees payable to non-executive directors and members of board sub-committees. These fees are approved by shareholders at the annual general meeting.
The committee comprises two non-executive directors, and is chaired by an independent non-executive director. The remuneration committee meets when necessary but at least once a year.
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Corporate Governance - continued
Directors' dealings and professional advice
The company operates a policy ( in compliance with the JSE Listings Requirements) of prohibiting dealings by directors and certain other managers in periods immediately preceding the announcement of its interim and year-end financial results, any period while the company is trading under cautionary announcement and at any other time deemed necessary by the board.
The board has established a procedure for directors, in furtherance of their duties, to take independent professional advice, if necessary, at the company's expense. All directors have access to the advice and services of the company secretary.
Company secretary
The company has engaged the services of an independent, professional company secretarial practice. The company secretary provides the board as a whole and directors individually with detailed guidance as to how their responsibilities should be properly
discharged in the best interest of the company. The company secretary provides a central source of guidance and advice to the board, and within the company, on matters of ethics and good corporate governance. The company secretary will be subjected to an annual evaluation by the board.
Communication
It is Ellies policy to meet regularly with institutional shareholders and investment analysts, as well as to provide presentations on the company and its performance.
Ethics
Ellies is committed to promoting the highest standards of ethical behaviour among all its employees and business associates.
Director
ER Salkow (Chairman)WMG Samson (CEO)MF Levitt (CFO)JH Murray (Resigned 19 February 2009)
RH Berkman^AC Brooking*
MS Mazwi*t^ HS Epstein (Resigned 4 February 2009)
RE Otto (Appointed 15 July 2008)t#MR Goodford (Appointed 1 November 2009)
Board
6 (6)6 (6)6 (6)4 (6)4 (6)6 (6)6 (6)3 (5)4 (5)1 (2)
AuditCommittee
-->1 (2)--
2 (2)2 (2)
---
RemunerationCommittee
-4 (4)
---
4 (4)4 (4)2 (4)
-2 (4)
Attendance / Participation at meetings
*Non-executive t IndependentNon-executive# Chairman audit committee
^Chairman remuneration committee
>by invitation
Annual Report 2009
20
A Welder from Ellies Engineering, Johannesburg.
Ellies Holdings LTD
21
Ellies Holdings Directorate
Raymond BerkmanExecutive Director
Age 53
Mziwamahlubi MazwiNon-executive Director
Age 40
Ryan OttoExecutive Director
Age 29
Malcolm GoodfordIndependent Non-executive Director
Age 43
Andrew BrookingNon-executive Director
Age 45
Elliot Salkow Chairman
Age 56
Wayne Samson Chief Executive Officer
Age 45
Micheal LevittChief Financial Officer
Age 61
Annual Report 2009
22
Ellies (Pty) Ltd Directorate
Grant MelvilleSales Director
Age 43
Micheal LivanosEngineering Director
Age 41
Vic HaskinsFinancial Director
Age 50
Mike MillerTechnical Director
Age 64
Gary GillinghamPower Products Director
Age 48
Barry ShumDirector - Nelspruit
Age 49
Mark RichterCorporate Division Director
Age 41
Norman ShumDirector - Kwa-Zulu Natal
Age 48
Gavin MelvilleDirector - Polokwane
Age 42
Mike VallisDirector - Namibia
Age 60
Gary WiltshireDirector - Bloemfontein
Age 38
Grant DavisDirector - Port Elizabeth
Age 48
Ellies Holdings LTD
23
Annual Financial Statementsfor the 12 months ended 30 April 2009
contentsStatement of responsibility bythe board of directors
Declaration by company secretary
Independent auditors' report
Directors' report
Balance sheets
Income statements
Share statistics
Statements of changes in equity
Cash flow statements
Principal accounting policies
Notes to financial statements
24
24
25
27
31
32
33
34
35
37
43
Ellies Holdings LTD
24
Statement of Responsibilityby the Board of Directorsfor the 12 months ended 30 April 2009
The directors acknowledge their responsibility for the adequacy of accounting records, the effectiveness of risk management and the internal control environment, the appropriateness of accounting policies supported by reasonable and prudent judgements and the consistency of estimates. The directors further acknowledge their responsibility for the preparation of the annual financial statements, adherence to applicable accounting standards and presentation of related information that fairly presents the state of affairs and the results of the company and of the group.
The annual financial statements set out in this report incorporate the results for the year ended 30 April 2009. They have been prepared by the directors in accordance with International Financial Reporting Standards and in the manner required by the South African Companies Act, 1973. They incorporate full and adequate disclosure and are based on appropriate accounting policies which have been consistently applied and which are supported by reasonable and prudent judgements and estimates.
In the context of the audit carried out for the purposes of expressing an opinion on the fair presentation of the annual financial statements, the auditors have concurred with the disclosures of the directors on going concern.
The external auditors are not responsible for providing an independent assessment of internal financial controls but are responsible for reporting on whether the annual financial statements are fairly presented in conformity with International Financial Reporting Standards. The external audit offers reasonable, but not absolute, assurance on the accuracy of financial disclosures.
Board Approval
The annual financial statements were approved by the board of directors and are signed on its behalf by:
ER Salkow - Chairman MF Levitt - Chief Financial Officer
08 October 2009
In our capacity as Company Secretary we declare, in terms of the South African Companies Act, 1973, that for the period ended 30 April 2009 the company has lodged with the Registrar of Companies all such returns as are required of a public company in terms of this Act and that all such returns are true, correct and up to date.
Probity Business Services (Pty) Limited - Company Secretary
08 October 2009
Declaration by Company Secretary
Ellies Holdings LTD
25
Independent Auditors Reportfor the 12 months ended 30 April 2009
TO THE MEMBERS OF ELLIES HOLDINGS LIMITED
Report on the annual financial statements
We have audited the accompanying annual financial statements and group financial statements of Ellies Holdings Limited which comprise the directors' report, the balance sheets as at 30 April 2009 and the income statements, statements of changes in equity and cash flow statements for the year then ended; and a summary of significant accounting policies and other explanatory notes, as set out on pages 27 to 60.
Directors' responsibility for the financial statements and group financial statements
The directors are responsible for the preparation and fair presentation of these annual financial statements in accordance with International Financial Reporting Standards and in the manner required by the Companies Act in South Africa. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditors' responsibility
Our responsibility is to express an opinion on these annual financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual financial statements. The procedures selected depend on the auditors' judgement, including the assessment of the risks of material misstatement of the annual financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity's preparation and fair presentation of the annual financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by directors, as well as evaluating the overall presentation of the annual financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the annual financial statements and group financial statements present fairly, in all material respects, the financial position of Ellies Holdings Limited and its subsidiaries, as at 30 April 2009, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act in South Africa.
PKF (Jhb) Inc.Director: IM Lipworth
Registered AuditorsChartered Accountants (SA)Registration number: 1994/001166/21
08 October 2009Johannesburg
Annual Report 2009
26
Ellies warehousing facilities, Johannesburg
Ellies Holdings LTD
27
Directors’ Reportfor the 12 months ended 30 April 2009
The directors present their annual report, which forms part of the annual financial statements of the company and the group for the year ended 30 April 2009.
NATURE OF BUSINESS
The group is involved in:
?The manufacture, import and distribution of premium quality TV and video equipment-related products under the “Ellies” brand,
?The manufacture, import and distribution of premium quality satellite and associated equipment under the “Elsat” brand,
?“Ellies Corporate” and “Elsat Rentals” divisions, deal with industrial audio, satellite and TV distribution systems respectively,
?“Megatron Federal” and “Ellies Power” divisions manufacture products for power generation, for distribution and transmission and are dominant in the area of domestic electrical and surge protection.
GROUP RESULTS
Details of the group consolidated and company financial results, financial position and cash flows are set out in the audited annual financial statements.
SHARE CAPITAL
During the year the there were no changes to the authorised share capital.
During the year the following changes took place to the issued share capital:
?On 1 May 2008, 973,826 shares were issued as part of the purchase price adjustments for the Ellies' acquisitions.
?On 1 May 2008, 12,187,500 shares were issued as part of the Megatron Federal acquisition.
?Subsequent to the year end a further 24,035,498 shares will be issued as part of the Megatron Federal acquisition.
The company's unissued shares have been placed under the control of the directors until the upcoming annual general meeting.
BORROWING POWERS
The company has unlimited borrowing powers in terms of its Articles of Association.
SUBSIDIARIES
Details of the company's interest in subsidiaries at 30 April 2009 and at the date of this report, respectively, are set out in note 4 to the annual financial statements.
DIRECTORS
Directors in office during the period under review were:
Executive Non-Executive
ER Salkow (Chairman) AC Brooking WMG Samson (Chief executive officer) MS MazwiMF Levitt (Chief financial officer) MR Goodford (appointed 1 November 2008)RH Berkman HS Epstein (resigned 4 February 2009)RE Otto (appointed 15 July 2008)JH Murray (resigned 19 February 2009)
In terms of the articles of association, the following directors will retire as directors at the upcoming annual general meeting, and being eligible, offer themselves for re-election:
?ER Salkow?RH Berkman?MR Goodford
Annual Report 2009
28
DIRECTORS' EMOLUMENTS
Details of emoluments paid to directors in office are as follows:
Total
R
Medical aid and pension
benefits received
R
Director
ER SalkowWMG SamsonMF LevittJH Murray (Resigned)
RH BerkmanRE OttoTotal
Fees forservices as
director
R
Basic salary and
allowance
R
Bonus
R
1,303,1221,517,7761,393,940
408,3191,142,4001,399,9007,165,457
500,000500,000500,000
---
1,500,000
-------
1,881,1222,095,7761,971,940
436,1171,203,8751,522,2259,111,055
78,00078,00078,00027,79861,475
122,325445,598
Total
R
Medical aid and pension
benefits received
R
Director
ER SalkowWMG SamsonMF LevittJH MurrayRH BerkmanTotal
Fees forservices as
director
R
Basic salary and
allowance
R
1,189,3261,360,7121,261,905
47,4721,020,0004,879,415
------
1,235,2141,483,5401,375,044
100,9621,105,4885,300,248
45,888122,828113,139
53,49085,488
420,833
For the year ended 30 April 2009:
For the period ended 30 April 2008:
No fees were paid to the non-executive directors for the 2009 and 2008 periods under review.
Ellies Holdings LTD
29
Directors’ Report - continuedfor the 12 months ended 30 April 2009
DIRECTORS' SHAREHOLDING
At 30 April 2009, directors in office during the period under review held 123,298,601 shares (2008: 121,302,710) or 49.99% (2008: 51.94%) of the issued ordinary share capital of the company. Save for the shareholdings detailed below, no other director in office during the period under review held any interest in the issued ordinary share capital of the company.
Director
Executive DirectorsER SalkowWMG SamsonMF LevittRH BerkmanRE Otto
Non -Executive DirectorsAC BrookingMS MazwiMR GoodfordTotal
IndirectBeneficial
29,739,7661,768,9001,768,9004,070,298
-
405,8857,500,000
-45,253,749
Total shareholding
85,703,6584,064,1003,554,1009,127,1086,093,750
530,8857,725,000
250,000117,048,601
IndirectNon-beneficial
-----
----
55,963,8922,295,2001,785,2005,056,8106,093,750
125,000225,000250,000
71,794,852
DirectBeneficial
-----
----
DirectNon-beneficial
Shareholdings of directors currently in office at the date of this report, are set out below:
Director
Executive DirectorsER SalkowWMG SamsonMF LevittRH BerkmanRE Otto
Non -Executive DirectorsAC BrookingMS MazwiTotal
IndirectBeneficial
29,739,7661,768,9001,768,9004,070,298
-
405,8857,500,000
45,253,749
Total shareholding
91,703,6584,064,1004,054,1009,127,1086,093,750
530,8857,725,000
123,298,601
IndirectNon-beneficial
-----
---
61,963,8922,295,2002,285,2005,056,8106,093,750
125,000225,000
78,044,852
DirectBeneficial
-----
---
DirectNon-beneficial
For the year ended 30 April 2009
Director
Executive DirectorsER SalkowWMG SamsonMF LevittJH MurrayRH Berkman
Non -Executive DirectorsAC BrookingHS EpsteinMS MazwiTotal
IndirectBeneficial
Total shareholding
IndirectNon-beneficial
12,373,350516,200516,200
1,500,0004,063,298
125,000125,000
62,50019,281,548
75,428,9413,537,8003,537,8003,500,0004,628,062
125,000125,000
7,562,50098,445,103
91,378,3504,054,0004,054,0005,000,0008,691,360
250,000250,000
7,625,000121,302,710
-----
----
3,576,059----
---
3,576,059
DirectBeneficial
DirectNon-beneficial
For the period 30 April 2008
Annual Report 2009
30
COMPANY SECRETARY
The secretary of the company is Probity Business Services (Pty) Limited.
AUDIT COMMITTEE REPORT
The committee fulfilled its responsibilities for the year under review and has satisfied itself as to the competency of the financial director of the company as well as the independence of the external auditors and their suitability for reappointment for the ensuing year.
EXTERNAL AUDITORS
It will be proposed at the annual general meeting that PKF (Jhb) Inc. continue in office as external auditors in accordance with Section 270(2) of the South African Companies Act, 1973.
DIVIDEND
No dividend was declared or proposed during the current year and prior period under review.
CHANGE IN YEAR-END
During the prior period, the year-end of the company was changed from the last day of February to 30 April. The group's prior year annual results accordingly covered a 14 month period, representing a 12 month trading period from 1 May 2007 until 30 April 2008.
SPECIAL RESOLUTIONS
The following special resolutions were passed on 24 November 2008 and registered during the year under review:
?To amend the company's Articles of Association;
?To approve general authority to the directors to effect share repurchases.
POST BALANCE SHEET EVENTS
No material fact or circumstance has occurred between year end and the date of this report which has a material impact on the financial position of the group or the company.
Ellies Holdings LTD
31
Balance Sheetsas at 30 April 2009
Notes
ASSETS
Non-current assets
Current assets
EQUITY AND LIABILITIES
Property, plant and equipment 1
Goodwill 2
Other intangible assets 3
Investments in subsidiaries 4
Deferred taxation 5
Inventories 6
Trade and other receivables 7
Taxation receivable
Other current assets 8
Bank and cash balances 9
TOTAL ASSETS
Capital and reserves
Share capital 10
Share premium 11
Non-distributable reserves 12
Retained earnings / (losses)
Non-current liabilities
Interest bearing liabilities 13
Vendor loans payable 14
Deferred taxation 5
Current liabilities
Interest-bearing liabilities 13
Vendor loans payable 14
Trade and other payables 15
Provisions 16
Taxation payable
Bank overdrafts 9
TOTAL EQUITY AND LIABILITIES
Group
2009
R
258,468,974
31,383,675
217,553,983
4,893,754
4,637,562
487,895,554
301,190,864
156,134,729
1,952,535
897,932
27,719,494
746,364,528
385,683,763
2,707
440,556,962
(178,335,326)
123,459,420
90,369,337
28,178,845
60,634,835
1,555,657
270,311,428
8,394,783
31,659,823
130,242,536
15,174,726
3,552,974
81,286,586
746,364,528
Company
2009
R
337,636,933
-
-
-
337,636,933
-
123,519,245
-
-
-
123,509,162
10,083
461,156,178
435,058,052
2,707
440,556,962
-
(5,501,617)
12,441,281
-
12,441,281
-
13,656,845
-
13,607,681
46,264
-
2,900
-
461,156,178
Group
2008
R
78,028,128
26,582,766
47,704,840
-
3,740,522
400,138,058
202,733,149
150,468,069
-
1,312,511
45,624,329
478,166,186
235,268,251
2,335
355,169,583
(178,194,003)
58,290,336
22,665,281
406,647
22,126,127
132,507
220,232,654
326,303
4,276,518
95,149,974
13,726,308
20,863,068
85,890,483
478,166,186
Company
2008
R
333,180,444
-
-
-
333,180,444
-
45,488,968
-
2,797,527
-
42,680,189
11,252
378,669,412
352,209,162
2,335
355,169,583
-
(2,962,756)
22,126,127
-
22,126,127
-
4,334,123
-
4,276,518
57,605
-
-
-
378,669,412
Annual Report 2009
32
Income Statementsfor the 12 months ended 30 April 2009
Notes
Revenue
Gross profit
Profit before interest and taxation 17
Cost of sales
Other income
Operating expenses
Depreciation
Amortisation of intangible assets
Operating profit before impairment
of intangible assets
Impairment of goodwill
Interest received 18
Interest paid 19
Profit / (loss) before taxation
Taxation 20
Profit / (loss) for the year
12 monthsended
30 April 2009R
976,846,314
(605,149,645)
371,696,669
8,358,849
(248,646,454)
(10,018,633)
(8,202,663)
113,187,768
-
113,187,768
1,143,576
(24,601,855)
89,729,489
(24,560,405)
65,169,084
14 monthsended
30 April 2008R
701,941,731
(435,865,152)
266,076,579
3,816,483
(173,743,856)
(7,048,049)
-
89,101,157
(750,000)
88,351,157
783,294
(7,150,554)
81,983,897
(23,693,561)
58,290,336
14 monthsended
30 April 2008R
-
-
-
-
-
-
-
-
-
-
-
(2,962,756)
(2,962,756)
-
(2,962,756)
12 monthsended
30 April 2009R
-
-
-
475,000
(464,642)
-
-
10,358
-
10,358
-
(2,546,319)
(2,535,961)
(2,900)
(2,538,861)
Group CompanyGroup Company
Ellies Holdings LTD
33
Share Statisticsfor the 12 months ended 30 April 2009
Notes
Basic earnings per share (cents) 21
Headline earnings per share (cents) 21
Core headline earnings per share (cents) 21
Diluted earnings per share (cents) 21
Diluted headline earnings per share (cents) 21
Diluted core headline earnings per share (cents) 21
Net asset value per share (cents) 22
Tangible asset value per share (cents) 22
12 monthsended
30 April 2009
R
26.42
26.42
32.16
24.08
24.08
29.30
156.38
68.17
14 monthsended
30 April 2008
R
30.25
30.60
32.15
30.10
30.45
31.98
100.75
80.32
Group Group
Annual Report 2009
34
Statements of Changes in Equityfor the 12 months ended 30 April 2009
GROUP
COMPANY
Balance at 5 March 2007
Shares issued at premium
Listing expenses
Arising from common control transactions
Profit for the period
Balance at 30 April 2008
Shares issued and to be issued at premium
Profit for the year
foreign currency translation reserve
Balance at 30 April 2009
Balance at 5 March 2007 (date of incorporation)
Shares issued at premium
Listing expenses
Loss for the period
Balance at 30 April 2008
Shares issues and to be issued at premium
Loss for the year
Balance at 30 April 2009
(date of incorporation) -
2,335
-
-
-
2,335
372
-
-
2,707
-
2,335
-
-
2,335
372
-
2,707
-
361,780,108
(6,610,525)
-
-
355,169,583
85,387,379
-
-
440,556,962
-
361,780,108
(6,610,525)
-
355,169,583
85,387,379
-
440,556,962
-
-
-
(178,194,003)
-
(178,194,003)
-
-
(141,323)
(178,335,326)
-
-
-
-
-
-
-
-
-
-
-
-
58,290,336
58,290,336
-
65,169,084
-
123,459,420
-
-
-
(2,962,756)
(2,962,756)
-
(2,538,861)
(5,501,617)
-
361,782,443
(6,610,525)
(178,194,003)
58,290,336
235,268,251
85,387,751
65,169,084
(141,323)
385,683,763
-
361,782,443
(6,610,525)
(2,962,756)
352,209,162
85,387,751
(2,538,861)
435,058,052
Sharecapital
R
Sharepremium
R
Non-distributable
reservesR
Retainedearnings /(losses)
R
Total
R
Ellies Holdings LTD
35
Cash Flow Statementsfor the 12 months ended 30 April 2009
Notes
Cash flows from operating activities
Cash flows from investing activities
Cash generated from / (utilised by) operations 23
Interest received 18
Interest paid 25
Taxation paid 24
Additions to property, plant and equipment
Proceeds on disposal of property, plant and equipment
Increase in loans to subsidiaries
Acquisition of businesses / subsidiaries
Cash flows from financing activities
Proceeds from share issue (net of costs)
Increase /( decrease) in interest bearing liabilities
(Decrease) / increase in vendor liabilities
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents acquired as part of
business combinations
Cash and cash equivalents end of year
Cash and cash equivalents consist of:
Bank and cash balances
Bank overdraft
12 monthsended
30 April 2009
R
12 monthsended
30 April 2009
R
14 monthsended
30 April 2008
R
14 monthsended
30 April 2008
R
Group CompanyGroup Company
(4,859,851)
56,901,666
1,143,576
(16,362,966)
(46,542,127)
(31,600,918)
(7,652,282)
426,364
(24,375,000)
21,084,613
-
33,162,587
(12,077,974)
(15,376,156)
(40,266,154)
2,075,218
(53,567,092)
27,719,494
(81,286,586)
(53,567,092)
2,898,833
2,898,833
-
-
-
-
-
-
-
-
(2,900,002)
-
-
(2,900,002)
(1,169)
11,252
-
10,083
10,083
-
10,083
(53,407,357)
(39,076,485)
783,294
(4,187,909)
(10,926,257)
(20,928,876)
(7,393,434
553,336
(14,088,778)
54,596,246
55,189,997
(593,751)
-
(19,739,987)
-
(20,526,167)
(40,266,154)
45,624,329
(85,890,483)
(40,266,154)
(2,739,922)
(2,739,922)
-
-
-
(72,916,066)
-
-
(51,968,549)
(20,947,517)
75,667,240
55,189,997
-
20,477,243
11,252
-
-
-
11,252
11,252
-
11,252
Annual Report 2009
36
Ellies distribution facilities, Johannesburg.
Ellies Holdings LTD
37
Principal Accounting Policiesfor the 12 months ended 30 April 2009
The principal accounting policies as set out below have been applied, unless otherwise stated.
BASIS OF PREPARATION
These annual financial statements have been prepared in conformity with International Financial Reporting Standards (“IFRS”), the requirements of the South African Companies Act and the Listings Requirements of the JSE Limited on the historic cost basis except in the case of financial instruments which are measured using the fair value and amortised cost models. The preparation of annual financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts in the annual financial statements. The areas involving a higher degree of judgement or complexity, or areas where assumptions or estimates are significant to the annual financial statements are disclosed under the management estimates heading.
STANDARDS AND INTERPRETATIONS EFFECTIVE IN 2008 / 2009, BUT NOT RELEVANT
The following amendments were mandatory for accounting periods beginning on or after 1 January 2008 but are not relevant to the operations of the company.
?IFRIC 11 – Group and treasury share transactions;
?IFRIC 12 – Service concession arrangements; and
?IFRIC 14 – (IAS 19) – The limit on a defined benefit asset and minimum funding requirements.
STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE
At the date of authorisation of these annual financial statements, the following Standards and Interpretations were in issue, but not yet effective (on or after 1 January 2009 unless specified).
Note: Amendments in italics represent amendments introduced under the Improvements Project.
Standards:
?IFRS 1: First-time Adoption of International Financial Reporting Standards
- Measurement of the cost of investments in subsidiaries, jointly controlled entities and associates when adopting IFRS for the first time.
?IFRS 2: Share-based Payment- Amendment relating to vesting conditions and cancellations
?IFRS 3: Business Combinations (1 July 2009)- Amendments to accounting for business combinations
?IFRS 7: Financial Instruments: Disclosures- Presentation of finance costs
?IFRS 8: Operating Segments- New standard on segment reporting (replaces IAS 14)
?IAS 1: Presentation of Financial Statements- Amendments to the structure of the financial statements.- Current/non-current classification of derivatives
?IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors- Status of the implementation guidance
?IAS 10: Events after the Reporting Period- Dividends declared after the end of the reporting period·
?IAS 16: Property, Plant and Equipment- Recoverable amount- Sale of assets held for rental
?IAS 18: Revenue- Costs of originating a loan
?IAS 19: Employee Benefits- Curtailments and negative past service cost- Plan administration costs- Replacement of term “fall due”- Guidance on contingent liabilities
?IAS 20: Accounting for Government Grants and Disclosure of Government Assistance- Government loans with a below-market rate of interest- Consistency of terminology with other IFRSs
Annual Report 2009
38
?IAS 23: Borrowing Costs- Amendment requiring capitalisation only model- Components of borrowing costs
?IAS 27: Consolidated and Separate Financial Statements- Amendments dealing with measurement of the cost of investments when adopting IFRS for the first time.- Consequential amendments from changes to Business Combinations.- Measurement of subsidiary held for sale in separate financial statements
?IAS 28: Investments in Associates- Consequential amendments from changes to Business Combinations.- Required disclosures when investments in associates are accounted for at fair value through profit or loss.- Impairment of investment in associates
?IAS 29: Financial Reporting in Hyperinflationary Economics- Description of measurement basis in financial statements- Consistency of terminology with other IFRSs
?IAS 31: Interests in Joint Ventures- Consequential amendments from changes to Business Combinations- Required disclosures when interests in jointly controlled entities are accounted for at fair value
?IAS 32: Financial Instruments: Presentation- Certain financial instruments will be classified as equity whereas prior to these amendments they would have been classified as financial liabilities
?IAS 34: Interim Financial Reporting- Earnings per share disclosures in interim financial reports
?IAS 36: Impairment of Assets- Disclosure of estimates used to determine recoverable amount
?IAS 38: Intangible Assets- Advertising and promotional activities- Unit of production method of amortisation
?IAS 39: Financial Instruments: Recognition and Measurement- Reclassification of derivatives into or out of the classification of at fair value through profit or loss- Designating and documenting hedges at the segment level- Applicable effective interest rate on cessation of fair value hedge accounting
?·IAS 39: Financial Instruments: Recognition and Measurement(1 July 2009)- Clarifies two hedge accounting issues:- Inflation in a financial hedged item- A one-sided risk in a hedged item
?IAS 40: Investment Property- Property under construction or development for future use as investment property- Consistency of terminology with IAS 8- Investment property held under lease
?IAS 41: Agriculture- Discount rate for fair value calculations- Additional biological transformation- Examples of agricultural produce and products- Point-of-sale costs
Interpretations:
?IFRIC 13: Customer Loyalty Programmes (1 July 2008)
?IFRIC 15: Agreements for the Construction of Real Estate
?IFRIC 16: Hedges of a Net Investment in a Foreign Operation (1 October 2008)
The directors have not yet determined what the impact of these Standards and Interpretations on the group or the company will be.
Ellies Holdings LTD
39
Principal Accounting Policies - continued
BASIS OF CONSOLIDATION
The group annual financial statements consolidate the financial statements of the company and all subsidiaries. Subsidiaries are those entities in which the group has the power to exercise control over the financial and operating policies. The results of subsidiaries are consolidated from the effective date of control up to the date control ceases.
Subsidiary companies in the separate financial statements.
Investments in subsidiaries are accounted for at cost less impairment.
Intra-group transactions and balances
Consolidation principles relating to the elimination of intra-company transactions and balances and adjustments for unrealised intra-company profits, are applied in all intra-group dealings.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at historic cost and depreciated over the estimated useful life of the asset, on a straight-line basis,as follows:
Computer equipment & software 25 – 50% pa
Leasehold improvements Over the duration of the lease period
Motor vehicles 20 – 25% pa
Plant and machinery 5 – 10% pa
Office equipment 10% pa
Furniture and equipment 10 – 16,67% pa
The carrying value of assets is reviewed at each balance sheet date to assess whether there is an indication of impairment. If any indication exists, the recoverable amount of the asset is estimated. Where the carrying amount is greater than its estimated recoverable amount, the asset is written down to its estimated recoverable amount and an impairment loss is recognised in the income statement. The useful lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In reassessing assets lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values. Gains and losses on disposal of property, plant and equipment are determined by comparing proceeds with the carrying value and are included in operating profit. Repairs and maintenance are charged to the income statement during the financial year in which they are incurred. The cost of major refurbishments is included in the carrying amount of the asset when it is probable that future economic benefits will
flow to the group. Major refurbishments are depreciated over its remaining useful life.
LEASES
Leases are classified as finance leases where substantially all the risks and rewards associated with ownership of an asset are transferred from the lessor to the group as lessee. Assets subject to finance leases are capitalised at their cash cost equivalent with the related lease obligation recognised at the same value. Capitalised leased assets are depreciated to their estimated residual values over their estimated useful lives. Finance lease payments are allocated, using the effective interest rate method, between lease finance costs, which is included in financing costs, and the capital repayment, which reduced the liability to the lessor. Leases where the lessor retains risks and rewards of ownership of the underlying asset are classified as operating leases. Payments made under operating leases are charged against income. Rentals payable under operating leases are charged to profit and loss on a straightline basis over the term of the relevant lease.
INVENTORIES
Inventories are valued at the lower of cost or net realisable value, which ever is the lowest. Costs are determined on the following basis:
Finished goods are valued at cost on a first-in-first-out (FIFO) basis. Where necessary, specific provision is made for obsolete, redundant and slow-moving inventories, while provisions based on the age of merchandise are made.
Annual Report 2009
40
FOREIGN CURRENCY
Transactions
Transactions in foreign currencies are converted to South African Rand at the rate of exchange ruling at the date of the transaction. Assets and liabilities in foreign currencies are stated in South African Rand using rates of exchange ruling at the financial year end. Resulting surpluses and deficits are included in financing costs and are separately identified.
Foreign subsidiaries and associates – translation
Once-off items in the income and cash flow statements of foreign subsidiaries and associates expressed in currencies other than the South African Rand are translated to South African Rand at the rates of exchange prevailing on the day of the transaction. All other items are translated at weighted average rates of exchange for the relevant reporting period. Assets and liabilities of these undertakings are translated at closing rates of exchange at each balance sheet date. All translation exchange differences arising on the retranslation of opening net assets together with differences between income statements translated at average and closing rates are recognised as a separate component of equity. For these purposes net assets include loans between group companies that form part of the net investment, for which settlement is neither planned nor likely to occur in the foreseeable future and is either denominated in the functional currency of the parent or the foreign entity. When a foreign operation is disposed of, any related exchange differences in equity are recycled through the income statement as part of the gain or loss on disposal.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity.
TAXATION
Current taxation comprises taxation payable calculated on the basis of the expected taxable income for the year, using the taxation rates substantively enacted at the balance sheet date, and any adjustment of taxation payable for previous years.
DEFERRED TAXATION
Deferred taxation is provided in full, using the liability method, on temporary differences arising between the taxation bases of assets and liabilities and their carrying amounts for financial reporting purposes. Currently substantively enacted taxation rates are used to calculate deferred taxation. Deferred taxation assets relating to deductible temporary differences are only recognised to the extent that it is probable that they will result in future economic benefits, in the form of reductions in the future taxable income, for the group. Deferred taxation is charged to the income statement except to the extent that it relates to transactions recognised directly in equity. The effect on deferred taxation of any changes in taxation rates is recognised in the income statement, except to the extent that it relates to transactions recognised directly in equity.
BUSINESS COMBINATIONS
Goodwill
Goodwill arising on consolidation represents the excess of the costs of acquisition over the group's interest in the fair value of the identifiable assets (including intangibles), liabilities and contingent liabilities of the acquired entity at the date of acquisition. Where the fair value of the group's share of separable net assets acquired exceeds the fair value of the consideration, the difference is recorded as negative goodwill. Negative goodwill arising on an acquisition is recognised immediately in the income statement.
Goodwill is stated at cost less impairment losses and is reviewed for impairment on an annual basis. Any impairment identified is recognised immediately in the income statement and is not reversed. Where a business combination occurs in several stages, the goodwill associated with each stage is, where practicable, calculated using fair value information at the date of each additional share purchase. Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each of those cash-generating units is in accordance with the basis on which the businesses are managed and according to the differing risk and reward profiles.
Common control transactions
Acquisitions of subsidiaries which do not result in a change of control of the subsidiary are accounted for as common control transactions. The excess of the cost of the acquisition over the group's interest in the carrying value of the identifiable assets and liabilities of the acquired entity, is carried as a non distributable reserve in the consolidated results.
PROVISIONS
Ellies Holdings LTD
41
Principal Accounting Policies - continued
Provisions are recognised when the group has a legal or constructive obligation as a result of a past event, for which it is probable that an outflow of economic benefit will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
REVENUE
Revenue is stated at invoice value of finished goods sold, excluding value added tax. Revenue from sale of goods is recognised when the significant risks and rewards of ownership are transferred to the buyer, costs can be measured reliably and receipt of the future benefits is probable. Other income earned by the group is recognised on the following basis:
?Interest income is recognised as it accrues on the effective interest method unless collectability is in doubt.
EMPLOYEE BENEFITS
Short-term employee benefits
The cost of all short-term employee benefits is recognised during the period in which the employee renders the related service. The provisions for employees' entitlements to wages, salaries, annual and sick leave represent the amount which the group has a present obligation to pay as a result of the employees' services provided to the balance sheet date.
Retirement benefits
The group provides retirement benefits for employees by payments to independent defined contribution funds and contributions are charged against income as incurred. A financial review of the Ellies Provident Fund is undertaken annually.
FINANCIAL INSTRUMENTS
Initial recognition and measurement
All financial instruments are recognised on the balance sheet. Financial instruments are initially recognised when the group becomes party to the contractual terms of the instruments and are measured at fair value, which is generally the fair value of the consideration given (financial asset) or received (financial liability or equity instrument) for it. Financial liabilities and equity instruments are classified according to the substance of the contractual arrangement on initial recognition. Transaction costs are included in the initial measurement of the financial instrument except if it is classified as at fair value through profit or loss. Subsequent to initial recognition these instruments are measured as set out below.
Financial assets
Trade and other receivables
Trade and other receivables are stated at cost less provision for doubtful debts. The provision for impairment is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Bad debts are written off during the year in which they are identified.
Cash and cash equivalents
Cash and cash equivalents are measured at their fair value. For the purpose of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held on call, and investments in money market instruments, net of bank overdrafts, all of which are available for use by the group unless otherwise stated.
Financial liabilities
The group's principal financial liabilities are long-term borrowings, accounts payable and bank overdrafts and other short-term borrowings.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.
Trade and other payables
Trade payables are measured initially at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.
Derecognition
Financial assets (or a portion thereof) are derecognised when the group realises the rights to the benefits specified in the contract, the rights expire or the group surrenders or otherwise loses control of the contractual rights that comprise the financial asset. In derecognition, the difference between the carrying amount of the financial asset and proceeds receivable and any prior adjustment to reflect fair value that had been reported in equity are included in the income statement. Financial liabilities (or a portion thereof) are derecognised when the obligation specified in the contract is discharged, cancelled or expires. On derecognition, the difference between the carrying amount of the financial liability, including related unamortised costs, and amount paid for it are included in the income statement.
Set-off
Where a legally enforceable right to set-off exists for recognised financial assets and financial liabilities, and there is an intention to settle the liability and realise the asset simultaneously, or to settle on a net basis, all related financial effects are set-off.
MANAGEMENT ESTIMATES
Certain accounting policies have been identified as involving particularly complex or subjective judgements or assessments, as follows:
Assets lives and residual values
Annual Report 2009
42
Property, plant and equipment is depreciated over its useful life taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In reassessing assets lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values.
Impairment of assets
Goodwill is considered for impairment at least annually. Property, plant and equipment and intangible assets are also considered for impairment if there is any reason to believe that an impairment may be necessary. Factors taken into consideration include the economic viability of the asset itself and where it is a component of a large economic unit, the viability of the unit. Future cash flows expected to be generated by the assets are projected, taking into account market conditions and the expected useful lives of the assets. The present value of these cash flows determined using an appropriate discount rate, is compared to the current asset value and, if lower, the assets are impaired to the present value.
Provisions
The warranty provision has been raised for future estimated warranty claims based on past experience.
Trade and other receivables
The group assesses its trade and other receivables for impairment at each balance sheet date. In determining whether an impairment should be recognised in the income statement, the group makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from each receivable.
Stock impairments
Impairment of stock is calculated on a line by line basis with reference to average consumption to identify slow moving, defective or obsolete items.
Deferred tax asset
The group recognises the future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the group to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the group to realise the net deferred tax assets recorded at the balance sheet date could be impacted.
Ellies Holdings LTD
43
Notes to the Financial Statementsfor the 12 months ended 30 April 2009
GROUP - 30 April 2009
Net carrying value
30 April 2008
Net carrying value
Cost
Accumulated depreciation and impairments
Carrying value 1 May 2008
Additions as a result of business combinations
Additions
Transfer between categories
Disposals
Depreciation
Foreign translation
Closing net carrying value
At cost
Accumulated depreciation and impairments
Carrying value 5 March 2007
Additions as a result of business combinations
Additions
Disposals
Depreciation
Closing net carrying value
Movement summary
Movement summary
25,311,262
(7,831,489)
15,311,428
3,922,822
2,715,916
98,517
-
(4,568,910)
-
17,479,773
18,574,007
(3,262,579)
-
15,452,165
3,121,842
-
(3,262,579)
15,311,428
17,479,773
15,311,428
4,845,158
(2,594,970)
1,629,322
374,970
1,554,219
-
(30,116)
(1,273,412)
(4,795)
2,250,188
2,946,085
(1,316,763)
-
1,311,258
1,052,361
-
(734,297)
1,629,322
2,250,188
1,629,322
8,813,017
(2,513,637)
6,187,323
1,223,365
1,610,777
(16,533)
(373,576)
(2,307,485)
(24,491)
6,299,380
6,368,984
(181,661)
-
7,099,985
1,659,376
(464,949)
(2,107,089)
6,187,323
6,299,380
6,187,323
5,543,046
(1,754,735)
3,277,458
542,336
1,569,046
(81,984)
(18,012)
(1,494,017)
(6,516)
3,788,311
3,531,661
(254,203)
-
2,645,369
1,468,758
-
(836,669)
3,277,458
3,788,311
3,277,458
2,084,834
(518,811)
177,235
1,597,860
202,324
-
-
(374,809)
(36,587)
1,566,023
284,650
(107,415)
-
193,553
91,097
-
(107,415)
177,235
1,566,023
177,235
46,597,317
(15,213,642)
26,582,766
7,661,353
7,652,282
-
(421,704)
(10,018,633)
(72,389)
31,383,675
31,705,387
(5,122,621)
-
26,702,330
7,393,434
(464,949)
(7,048,049)
26,582,766
31,383,675
26,582,766
Property, plant and equipment with a carrying value of R2,540,639 (2008: R405,954) is encumbered as security against certain interest-bearingliabilities (refer note 13).
COMPANYThe company has no property, plant and equipment as at 30 April 2009 and 30 April 2008.
1. Property, plant and equipment
Plant &Equipment
R
MotorVehicles
R
ComputerEquipment
R
OfficeEquipment
R
Land andleasehold
improvementsR
Total
R
Annual Report 2009
44
Cost
Accumulated amortisation and impairments
Opening net carrying value
Additions as part of business combinations
Additions - Ellies entities
Additions - Megatron
Impairments
Closing net carrying value
Net carrying value
Movement summary
GROUP - 30 April 2009
Net carrying value
Closing net carrying value
COMPANY - 30 April 2009
Cost as a result of business combinations
Accumulated amortisation and impairments
Opening net carrying value
Additions as a result of business combinations
Amortisation for the year
The company has no other intangible assets.
Movement Summary
3,337,766
(333,777)
3,003,989
-
3,337,766
(333,777)
3,003,989
9,758,651
(7,868,886)
1,889,765
-
9,758,651
(7,868,886)
1,889,765
13,096,417
(8,202,663)
4,893,754
-
13,096,417
(8,202,663)
4,893,754
218,303,983
(750,000)
217,553,983
47,704,840
-
1,170,124
168,679,019
-
217,553,983
48,454,840
(750,000)
47,704,840
-
7,500,000
40,954,840
-
(750,000)
47,704,840
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2. Goodwill
3. Other intangible assets
Group Company
2009R
Marketingrelated
R
Customerrelated
R
Total
R
2009R
2008R
2008R
Impairment ReviewIn accordance with IAS 36 impairment of assets, goodwill and intangible assets with indefinite useful lives are reviewed annually for impairment, or more frequently if there is an indication that goodwill might be impaired.
The recoverable amount of goodwill relating to all cash generating units has been determined on the basis of value in use calculations. All these cash generating units operate in the same economic environment for which the same key assumptions have been used. These calculations use cash flow projections based on financial projections, covering a five year period and a discount rate of 19.58% for all cash generating units. Cash flows beyond the five year period were extrapolated using a steady 4% nominal growth rate. Management believes that this growth rate does not exceed the long-term average growth rate for the market in which the companies operate. Any changes in revenue or costs are based on past practices and expectations of future changes in the market.
Management believes that changes in any of these key assumptions would not cause any additional impairment losses.
Ellies Holdings LTD
45
Notes to the Financial Statements - continuedfor the 12 months ended 30 April 2009
Ellies (Pty) LtdArchsat Investments (Gauteng)(Pty) Ltd
(Pty) LtdArchsat Investments (Cape)(Pty) Ltd
(Pty) LtdArchsat Investments (Natal)(Pty) Ltd
(Pty) LtdArchsat Investments (Pietersburg)(Pty) Ltd
(Pty) LtdArchsat Investments (Nelspruit)(Pty) Ltd
(Pty) LtdArchsat Investments (East Cape)(Pty) Ltd
(Pty) LtdADRS Technologies (Pty) Ltd
(Pty) Ltd(Pty) Ltd
Elsat (Botswana)(Pty) Ltd
Ellies Electronics (Cape)
Ellies Electronics (Natal)
Ellies Electronics (Pietersburg)
Ellies Electronics (Nelspruit)
Ellies Electronics Border-Kei
Ellies Electronics (Bloemfontien)
Ellies Electronics (Namibia) Ellies Electronics (Botswana)
RSARSARSARSARSARSARSARSARSARSARSARSARSARSA
NamibiaBotswanaBotswana
10,000,00010,000,000
100100100100100100100100100100
10,00010,000
100110
10
10,000,00010,000,000
100100100100100100100100100100
10,00010,000
100--
96,063,00096,063,00016,908,77416,908,77413,197,85813,197,858
8,816,7228,816,7227,840,8757,840,8758,235,026
13,213,5498,394,4758,394,4759,288,4612,228,2452,228,244
337,636,933
96,063,00096,063,00016,908,77416,908,77413,197,85813,197,858
8,816,7228,816,7227,840,8757,840,8758,235,026
13,213,5498,394,4758,394,4759,288,461
--
333,180,444
4. Investment in subsidiaries
CompanyIssued share capital Shares at cost
Country ofIncorporation
2009# of shares
2009R
2008# of shares
2008R
The balance consists of:Capital allowancesProvision for employee benefitsPrepaid expensesProvision for bad debts and otherprovisions against receivablesLease obligationsIncome received in advanceIntangible assetsOther
Balance at the begining of the yearAcquired as part of business combinationsArising from intangible assetsTemporary differences per income statementsReduction in liability due to rate changeCapital allowancesProvision for employee benefitsPrepaid expensesProvision for bad debts and otherprovisions against receivablesLease obligationsIncome in advanceIntangible assetsOtherBalance at end of year
Disclosed on the balance sheet as:Deferred taxation - non-current assetDeferred taxation- non-current liability
Movement Summary
(898,582)1,897,906
(85,954)
1,702,42824,398
1,831,252(1,370,251)
(19,292)3,081,905
3,608,015396,956
(3,666,997)2,743,931
-24,714
(1,114,403)(85,954)
430,584127,841
1,083,6952,296,746
(19,292)3,081,905
4,637,562(1,555,657)3,081,905
(990,834)2,682,889
-
1,271,845(103,443)
747,558--
3,608,015
-1,172,720
-2,435,295
(14,799)(136,615)1,642,640
-
-65,062
879,007--
3,608,015
3,740,522(132,507)
3,608,015
---
------
--------
------
---
---
------
--------
------
---
5. Deferred taxationGroup Company
2009R
2008R
2009R
2008R
Annual Report 2009
46
MerchandiseWork in progressGross inventoriesImpairment provision raised against inventories
Balance at the begining of the yearAcquired as part of business combinationsImpairment provisions raisedImpairment provisions utilised
Movement in impairment provision raisedagainst inventories
Balance at the end of the year
Gross trade receivablesProvision for doubtful debts
Net trade receivablesBotswana receivablesOther receivables
152,073,376(8,141,802)
143,931,574-
12,203,155156,134,729
--
----
--
-2,797,527
-2,797,527
153,004,280(6,031,399)
146,972,8812,797,527
697,661150,468,069
Movement in impairment provision raisedagainst receivables
Balance at the end of the year
Balance at the beginning of the yearAcquired as part of business combinationsImpairment provisions raisedImpairment provisions utilised
6,031,399600,618
2,547,895(1,038,110)8,141,802
-9,157,744
730,455(3,856,800)6,031,399
-----
-----
?Trade and other receivables have been encumbered to secure certain banking facilities.?Trade receivables are stated at cost less impairment provisions which normally approximate their fair value due to their short-
term maturity.?Before accepting any new customer, the group performs credit checks utilising external credit bureaus and banks. Industry
knowledge and visits to potential customer premises assist in the decision to accept a new customer and the setting of credit limits.?Credit limits are continuously monitored through payment history checks and industry information.
Basis of raising impairment provisions against receivables?All trade and other receivables are continuously reviewed on an individual basis. When all reasonable measures have been taken,
without success, in recovering a receivable amount and when reasonable doubt exists as to the recoverability of any such individual receivable amount, a corresponding provision for impairment is raised. Provisions for impairment raised against receivables are reversed when a receivable amount is either written off as bad debt, or when an amount previously provided against is received.
325,000,8182,605,953
327,606,771(26,415,907)301,190,864
14,033,803-
12,530,473(148,369)
26,415,907
-----
-----
-----
-----
216,766,952-
216,766,952(14,033,803)202,733,149
-22,488,535
-(8,454,732)14,033,803
6. Inventories
7. Trade and other receivables
Group Company
Group Company
2009R
2009R
2009R
2008R
2008R
2008R
2009R
2008R
Inventory up to a maximum of R50m (2008: nil) has been encumbered to secure certain banking facilities.
Related credit exposure and enhancementsMaximum exposure to credit losses of trade and other receivables 164,276,531 156,499,468 2,797,527-
Ellies Holdings LTD
47
Notes to the Financial Statements - continuedfor the 12 months ended 30 April 2009
Petty cashCurrent accountBank Overdraft
Disclosed on the balance sheet as followsCurrent assetCurrent liability
1,066,10826,653,386
(81,286,586)(53,567,092)
27,719,494(81,286,586)
(53,567,092)
-10,083
-10,083
10,083-
10,083
51,07845,573,251
(85,890,483)(40,266,154 )
45,624,329(85,890,483)
(40,266,154)
-11,252
-11,252
11,252-
11,252
9. Bank and cash balances
Group Company
2009R
2008R
2009R
2008R
Subsidiaries:Ellies (Pty) LtdEllies Electronics (East Cape) (Pty) LtdEllies Electronics (Natal) (Pty) LtdEllies Electronics (Pietersburg) (Pty) Ltd
Related party:Wiltshire and Wilstshire CC
----
897,932897,932
----
1,312,5111,312,511
121,976,433949,209513,520
70,000
-123,509,162
41,147,460949,209513,520
70,000
-42,680,189
8. Other current assets
Group Company
2009R
2008R
2009R
2008R
?These receivables are unsecured with no fixed terms of repayment. The amount with Wiltshire and Wiltshire CC accrues interest at the prime rate of interest, and the other loans are interest free.
Ageing of trade receivables(Normal terms: 30 to 60 days from statement)
Gross amounts:Current trade receivablesOverdue trade receivables30 days overdue60 days overdue
Net amounts:Current trade receivablesOverdue trade receivables30 days overdue60 days overdue
121,088,60530,984,77114,776,45816,208,313
152,073,376
121,088,60522,842,96914,776,458
8,066,511143,931,574
140,230,64712,773,633
4,167,4388,606,195
153,004,280
140,230,6476,742,2342,961,1583,781,076
146,972,881
-----
-----
-----
-----
7. Trade and other receivables: continued
Group Company
2009R
2008R
2009R
2008R
?The bank overdraft has been secured through a cession of trade receivables and inventory.
Annual Report 2009
48
Authorised
Issued and to be issued
800,000,000 (2008: 800,000,000) shares of R0.00001 each
270,722,913 (2008: 233,526,089) shares of R0.00001 each
8,000
2,707
8,000
2,707
8,000
2,335
8,000
2,335
10. Share capital
Group Company
2009R
2008R
2009R
2008R
The following changes to the issued share capitaltook place during the year
Issued at the beginning of the yearShares issued to promotersShares issued on acquisition of business / subsidiariesShares issued as part of private placementShares to be issued on acquisition of business
Issued and to be issued at the end of the year
233,526,089-
13,161,326-
24,035,498
270,722,913
1,00053,736,000
148,789,08931,000,000
-
233,526,089
1,00053,736,000
148,789,08931,000,000
-
233,526,089
233,526,089-
13,161,326-
24,035,498
270,722,913
2009# Shares
2008# Shares
2009# Shares
2008#Shares
Share premium on issued ordinary sharesIssue expenses set off against share premium
447,167,487(6,610,525)
440,556,962
361,780,108(6,610,525)
355,169,583
447,167,487(6,610,525)
440,556,962
361,780,108(6,610,525)
355,169,583
11. Share premium
Group Company
2009R
2008R
2009R
2008R
Arising from common controlForeign currency translation reserve
(178,194,003)(141,323)
(178,335,326)
(178,194,003)-
(178,194,003)
---
---
12. Non-distributable reserves
Group Company
2009R
2008R
2009R
2008R
Ellies Holdings LTD
49
Notes to the Financial Statements - continuedfor the 12 months ended 30 April 2009
Non-current portion
Current portion
Repayment terms(discounted):
Instalment sale liabilitiesTerm loans
Instalment sale liabilitiesTerm loans
1 year2-5 years
28,178,845801,539
27,377,306
8,394,783772,089
7,622,69436,573,628
8,394,78328,178,84536,573,628
---
----
---
406,647406,647
-
326,303326,303
-732,950
326,303406,647732,950
---
----
---
13. Interest-bearing liabilities
Group Company
2009R
2008R
2009R
2008R
?The instalment sales interest-bearing liabilities bear interest at various rates linked to prime rate (2008: prime) and are repayable in monthly instalments of R57,668 (2008: R49,040). These liabilities are secured by plant and equipment with a carrying value of R2,540,639 (2008: R405,954). The term loan interest-bearing liabilities bear interest at JIBAR +4% p.a. and are repayable in quarterly instalments of R3.2m commencing from July 2009.
?All interest-bearing liabilities are denominated in South African Rand.
?The directors consider the carrying amount of interest-bearing liabilities to approximate its fair value.
Non-current portionCurrent portion
60,634,83531,659,82392,294,658
22,126,1274,276,518
26,402,645
12,441,28113,607,68126,048,962
22,126,1274,276,518
26,402,645
14. Vendor loans
Group Company
2009R
2008R
2009R
2008R
?These loans bear interest at rates linked to prime.
?The directors consider the carrying amount of vendor loans to approximate its fair value.
Trade payablesEmployee benefitsVATIncome received in advanceOther payables
70,712,0457,005,288
16,129,13917,516,36518,879,699
130,242,536
----
46,26446,264
----
57,60557,605
81,932,4925,727,570
-5,136,1762,353,736
95,149,974
15 Trade and other payables
Group Company
2009R
2008R
2009R
2008R
?The directors consider the carrying amount of trade and other payables to approximate its fair value.
Provision for warrantyOpening balanceAcquired as part of business combinationProvisions raised
Balance at the end of the year
13,726,308-
1,448,418
15,174,726
-3,702,276
10,024,032
13,726,308
---
-
---
-
16. Provisions
Group Company
2009R
2008R
2009R
2008R
Annual Report 2009
50
Foreign exchange profits
Depreciation
Amortisation / impairment
Directors emoluments
Operating lease and rental charges
Profit on disposal of property, plant and equipment
Employees (excluding directors emoluments)
Audit fees
Plant and equipmentMotor vehiclesComputer equipmentOffice equipmentLand and leasehold improvements
Amortisation of intangible assetsImpairment of goodwill
For service as a directorNon-executive directorsExecutive directors
PremisesOther
Salaries and wagesEmployer contributions to retirement funds
Audit fees - current yearAudit fees -prior yearOther services
2,952,591
4,568,9102,307,4851,273,4121,494,017
374,80910,018,633
8,202,663-
--
9,111,0559,111,055
10,994,79141,521
11,036,312
4,660
111,857,1521,862,156
113,719,308
1,822,67719,075
166,6682,008,420
-
------
--
----
---
-
---
----
-
------
--
----
---
-
---
----
2,571,961
3,262,5792,107,089
734,297836,669107,415
7,048,049
-750,000
--
5,300,2485,300,248
4,194,758-
4,194,758
88,387
104,017,2132,474,449
106,491,662
1,003,731293,575
-1,297,306
17. Profit before interest and tax
Group Company
2009R
2008R
2009R
2008R
Funds and deposits with banksInterest received from related parties
1,023,196120,380
1,143,576
---
---
783,294-
783,294
18. Interest received
Group Company
2009R
2008R
2009R
2008R
Ellies Holdings LTD
51
Notes to the Financial Statements - continuedfor the 12 months ended 30 April 2009
Bank overdraftLong term liabilitiesDeemed interest incurred on vendor loansInterest paid to related partiesOther
South African normal taxation
Deferred taxation
Reconcilliation of rate of taxation
Effective taxation rate
Current yearPrior year over provision
Current year
Tax at South African normal taxation rateExempt income/dissalowable expensesTax lossesPrior year adjustmentsForeign taxes
30,227,391(2,921,423)
(2,745,563)
24,560,405
%28.0
2.7(0.2)(3.2)
0.1
27.4
2,900-
-
2,900
%28.0
(28.1)---
(0.1)
--
-
-
%28.0
(28.0)---
-
26,128,856-
(2,435,295)
23,693,561
%28.0
1.2(0.3)
--
28.9
15,904,948375,143
8,238,88981,635
1,24024,601,855
4,187,798-
2,962,756--
7,150,554
--
2,962,756--
2,962,756
--
2,546,319--
2,546,319
19. Interest paid
20. Taxation
Group
Group
Company
Company
2009R
2009R
2008R
2008R
2009R
2009R
2008R
2008R
Annual Report 2009
52
Basic earnings per share (cents)Headline earnings per share (cents)Core headline earnings per share (cents)Diluted earnings per share (cents)Diluted headline earnings per share (cents)Diluted core headline earnigns per share (cents)
The calculation of earnings per ordinary share for the group is based on the following:- Basic earnings- Headline earnings- Core headline earnings- Weighted average ordinary shares in issue- Fully diluted ordinary shares
Net profit after taxationAdjusted for:Profit of sale of property, plant and equipment
- Gross- Tax
Impairment of goodwill
Headline earnings attributable to ordinary shareholdersAdjusted for:Amortisation of intangibles
- Gross- Tax
IFRS implied interest on vendor liabilities
Core headline earnings attributable to ordinary shareholders
Weighted average number of sharesAdditional shares to be issued for Megatron acqusitionShares to be issued for agterskot achievementsTotal shares in issue and to be issued (Fully diluted shares)
Reconcilliation of headline and core headline earnings:
Reconcilliation of number of shares:
Total assets- Tangible- Intangible
Non-current liabilitiesCurrent liabilities
Net asset value
Ordinary shares in issue at year end
Net asset value per share (cents)Net tangible asset value per share (cents)
746,364,528523,916,791222,447,737
(90,369,337)(270,311,428)
385,683,763
246,638,901
156.3868.17
478,166,186430,461,346
47,704,840
(22,665,281)(220,232,654)
235,268,251
233,526,089
100.7580.32
26.4226.4232.1624.0824.0829.30
65,169,08465,165,72979,310,535
246,638,901270,674,398
65,169,084
(3,355)(4,660)
1,305
-
65,165,729
5,905,9178,202,663
(2,296,746)
8,238,889
79,310,535
246,638,90121,031,928
3,003,569270,674,398
30.2530.6032.1530.1030.4531.98
58,290,33658,976,69761,939,342
192,682,775193,656,600
58,290,336
(63,639)(88,387)
24,748
750,000
58,976,697
---
2,962,645
61,939,342
192,682,775-
973,825193,656,600
21. Earnings per share
22. Net asset value per ordinary share
Group
Group
2009R
2008R
2009R
2008R
Ellies Holdings LTD
53
Notes to the Financial Statements - continuedfor the 12 months ended 30 April 2009
Balance at the beginning of the yearAcquired as part of business combinationsCharged to the income statementBalance at the end of the year
20,836,598-
27,305,968(1,600,439)46,542,127
--
2,900(2,900)
-
-----
-5,633,999
26,128,856(20,836,598)10,926,257
24. Taxation paid
Group
2009R
2008R
2009R
2008R
Interest paid (refer to note 19)Deemed interest on vendor loans
24,601,855(8,238,889)16,362,966
7,150,554(2,962,645)4,187,909
2,546,319(2,546,319)
-
2,962,756(2,962,756)
-
25. Interest paid
Group Company
2009R
2008R
2009R
2008R
Profit /(loss) before taxationAdjusted for:
- Depreciation- Interest received- Interest paid- Amortisation of intangibles- Foreign currency translation reserve- Impairment of goodwill- Profit on disposal of property, plant & equipment- Increase in provisions
Changes in working capitalIncrease in inventoriesIncrease/(decrease) in trade and other recievablesIncrease in other current recievables(Decrease) / increase in trade and other payables
89,729,489
10,018,633(1,143,576)24,601,855
8,202,663(65,121)
-(4,660)
1,448,418132,787,701(75,886,035)(76,624,790)
29,976,495414,579
(29,652,319)56,901,666
81,983,897
7,048,049(783,294)7,150,554
--
750,000(88,387)
10,024,032106,084,851
(145,161,336)(108,156,135)
(43,916,216)-
6,911,015(39,076,485)
(2,535,961)
--
2,546,319-----
10,3582,888,475
-2,797,527
102,289(11,341)
2,898,833
(2,962,756)
--
2,962,756------
(2,739,922)-
(2,797,527)-
57,605(2,739,922)
23. Cash generated from/(utilised by) operations
Group Company
Company
2009R
2008R
2009R
2008R
Annual Report 2009
54
Assets
Liabilities
Non-current assetsProperty, plant and equipmentDeferred taxation
Current assetsInventoriesTrade and other receivablesTaxation receivableBank and cash balances
Non-current liabilitiesInterest bearing liabilities
Current liabilitiesTrade and other payablesInterest-bearing liabilitiesBank overdrafts
Carrying value of net assets acquired
Carrying value of net assets acquiredIntangible assets acquired:
- Marketing and customer related intangible assets acquired- Deferred tax on intangible assets- Residual goodwill from business combination
Purchase consideration of business combinationsDischarged as follows:
- Fair value of the shares- Deferred payment due in future years- Advance payment made in prior year- Cash payment on acquisition of business
Purchase consideration of business combinations
Number of ordinary shares issued and to be issued in terms of business combinations
The purchase price of the business acquired includes amounts in relation to the benefit of expected synergies, revenue growth and the assembled workforce of the business. These benefits are recognised as goodwill.
Pro forma amount as if the acquisitions occurred at the beginning of the periodActual amounts included in the results
4,961,6004,632,180
329,420
29,594,74614,212,02215,339,881
-42,843
-
33,598,81632,354,841
1,078,494165,481
957,530
957,530
13,096,417(3,666,997)
168,679,017
179,065,967
95,939,84858,751,119
-24,375,000
179,065,967
36,222,997
245,468,965235,004,091
3,098,8903,029,173
69,717
17,166,2667,620,9037,321,037
26,4702,197,856
202,212
16,776,57816,334,875
441,703-
3,286,366
3,286,366
--
1,170,124
4,456,490
1,998,3021,658,963
799,225-
4,456,490
999,151
41,213,89641,090,087
26. Business combinations
Megatron1 May 2008
R
RevenueR
Ellies/ElsatBotswana
31 October 2008R
PBTR
The following business combinations took place during the year ended 30 April 2009:
?Ellies acquired the business of Megatron Federal (Pty) Ltd ("Megatron") on 1 May 2008.
?As disclosed in the Ellies Holdings Prospectus, the conditions precedent to the acquisition of Ellies and Elsat Botswana were met during October 2008. The effective date in terms of IFRS 3 has been taken as 31 October 2008.
Group
Ellies Holdings LTD
55
Notes to the Financial Statements - continuedfor the 12 months ended 30 April 2009
Capital commitments
Operating lease commitments
There are no capital commitments
Computer and office equipmentPremises
These commitments accrue in the following periodsDue by April 2009Due by April 2010Due by April 2011Due by April 2012Due by April 2013Thereafter
All contributions on behalf of employees are charged to the income statement as they are made. The company has no liability towards any pension or provident fund, apart from normal recurring monthly contributions deducted from employees to be paid to relevant funds.
146,54242,623,63242,770,174
-9,009,4059,669,062
10,307,6465,121,6978,662,364
42,770,174
161,36550,949,86251,111,227
9,582,02110,260,49211,180,895
7,924,5387,929,9654,233,316
51,111,227
---
-------
---
-------
27. Commitments
28. Retirement benefits
Group Company
2009R
2008R
2009R
2008R
Annual Report 2009
56
30 April 2009
Non-current assetsProperty, plant and equipmentGoodwill and intangible assetsDeferred taxation
Current assetsInventoriesTrade and other receivablesTaxation receivableOther current assetsBank and cash balances
Total assets
Capital and reservesShare capitalShare premiumNon-distributable reservesRetained earnings
Non-current liabilitiesInterest-bearing liabilitiesVendor loans payableDeferred taxation
Current liabilitiesCurrent portion of interest-bearing liabilitiesCurrent portion of vendor loans payableTrade and other payablesProvisionsTaxation payableBank overdrafts
Total equity and liabilities
----
------
-
-----
----
-------
-
----
------
-
385,683,7632,707
440,556,962(178,335,326)
123,459,420
----
-------
385,683,763
258,468,97431,383,675
222,447,7374,637,562
487,895,554301,190,864
156,134,7291,952,535
897,93227,719,494
746,364,528
385,683,7632,707
440,556,962(178,335,326)
123,459,420
90,369,33728,178,84560,634,8351,555,657
270,311,4288,394,783
31,659,823130,242,53615,174,7263,552,974
81,286,586
746,364,528
----
175,546,795-
146,929,369-
897,93227,719,494
175,546,795
-----
----
-------
-
----
------
-
-----
88,813,68028,178,84560,634,835
-
217,298,2098,394,783
31,659,82395,957,017
--
81,286,586
306,111,889
258,468,97431,383,675
222,447,7374,637,562
312,348,759301,190,864
9,205,3601,952,535
--
570,817,733
-----
1,555,657--
1,555,657
53,013,219--
34,285,51915,174,726
3,552,974-
54,568,876
29. Analysis of assets and liabilities by financial instrument classification
Held forTrading
(at fair valuethrough profit
and loss)
R
Loansand
receivablesR
Finincialliabilites atamortised
costR
Non-financial
instrumentsR
Equity
R
Total
R
Ellies Holdings LTD
57
Notes to the Financial Statements - continuedfor the 12 months ended 30 April 2009
30 April 2008
Non-current assetsProperty, plant and equipmentGoodwill and intangible assetsDeferred taxation
Current assetsInventoriesTrade and other receivablesOther current assetsBank and cash balances
Total assets
Capital and reservesShare capitalShare premiumNon-distributable reserveRetained earnings
Non-current liabilitiesInterest-bearing liabilitiesVendor loans payableDeferred taxation
Current liabilitiesCurrent portion of interest-bearing liabilitiesCurrent portion of venodr loans payableTrade and other payablesProvisionsTaxation payableBank overdrafts
Total equity and liabilities
29. Analysis of assets and liabilities by financial instrument classification (continued)
The group’s operations expose it to a number of financial risks. A risk management programme has been established to protect the group against the potential adverse effects of these financial risks.
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt, which includes interest bearing liabilities disclosed in note 13, cash and cash equivalents and equity attributable to holders of the parent, comprising issued capital, reserves and retained earnings respectively.
30.1 Capital risk management
30. Financial risk management
----
-----
-
-----
----
-------
-
----
-----
-
235,268,2512,335
355,169,583(178,194,003)
58,290,336
----
-------
235,268,251
78,028,12826,582,76647,704,8403,740,522
400,138,058202,733,149
150,468,0691,312,511
45,624,329
478,166,186
235,268,2512,335
355,169,583(178,194,003)
58,290,336
22,665,281406,647
22,126,127132,507
220,232,654326,303
4,276,51895,149,97413,726,30820,863,06885,890,483
478,166,186
----
194,501,558-
147,564,7181,312,511
45,624,329
194,501,558
-----
----
-------
-
----
-----
-
-----
22,532,774406,647
22,126,127-
180,507,102326,303
4,276,51890,013,798
--
85,890,483
203,039,876
78,028,12826,582,76647,704,840
3,740,522
205,636,500202,733,149
2,903,351--
283,664,628
-----
132,507--
132,507
39,725,552--
5,136,17613,726,30820,863,068
-
39,858,059
Held forTrading
(at fair valuethrough profit
and loss)
R
Loansand
receivablesR
Financialliabilites atamortised
costR
Non-financial
instrumentsR
Equity
R
Total
R
Annual Report 2009
58
30 April 2009
30 April 2008
Bank and cash balancesTrade and other payablesTotal exposureTax effect @ 28%Total exposure after tax
Trade and other receivablesBank and cash balancesTotal exposureTax effect @ 28%Total exposure after tax
30 April 2009
30 April 2008
Non current liabilitiesInterest-bearing liabilitiesVendor loans payable
Current liabilitiesInterest-bearing liabilitiesVendor loans payableTrade and other payablesBank overdrafts
Non current liabilitiesInterest-bearing liabilitiesVendor loans payable
Current liabilitiesInterest-bearing liabilitiesVendor loans payableTrade and other payablesBank overdrafts
28,178,84560,634,835
8,394,78331,659,82395,957,01781,286,586
306,111,889
406,64722,126,127
326,3034,276,518
90,013,79885,890,483
203,039,876
--
3,703,94223,189,72095,957,017
-
122,850,679
--
51,6414,519,117
90,013,798-
94,584,556
--
7,715,4378,951,000
--
16,666,437
--
294,240---
294,240
32,534,64770,932,852
----
103,467,499
431,04626,584,512
----
27,015,558
32,534,64770,932,852
11,419,37932,140,72095,957,01781,286,586
324,271,201
431,04626,584,512
345,8814,519,117
90,013,79885,890,483
207,784,837
--
---
81,286,586
81,286,586
--
---
85,890,483
85,890,483
27,719,494(130,242,536)(102,523,042)
150,468,06945,624,329
196,092,398
3,529,916(14,926,146)(11,396,230)
176,4005,702,0325,878,432
59,700119,180178,880(50,087)128,794
3,528114,041117,569(32,920)
84,649
(59,700)(119,180)(178,880)
50,087(127,794)
(3,528)(114,041)(117,569)
32,920(84,649)
CarryingValue
R
CarryingValue ofFinancialliabilities
R
Expected settlement period of financial liabilities.
No terms
R
< 6 Months
R
6-12 months
R
>12 months
R
Amountsubject to
riskR
Impact onProfit of 2%increase in
foreign ratesR
Impact onProfit of 2%decrease inforeign rates
R
Totalundiscountedvalue of Fin-
ancial LiabilitiesR
30.3 Liquidity RiskLiquidity risk is the risk that the group will be unable to meet a financial commitment in any location or currency. The cash requirements of the group are managed according to its needs from time to time. The company manages liquidity risk by monitoring forecast cash flows and ensuring that adequate cash resources and unutilised borrowing facilities are maintained.
30.2 Currency risk managementThe group operates in a global business environment. Accordingly the group is exposed to the risk of fluctuating exchange rates. It is the group's policy not to hedge this exposure.
Ellies Holdings LTD
59
Notes to the Financial Statements - continuedfor the 12 months ended 30 April 2009
30 April 2009
30 April 2008
Current assetsOther current assetsBank and cash balances
Non-current liabilitiesInterest-bearing liabilitiesVendor loans payable
Current liabilitiesInterest-bearing liabilitiesVendor loans payableBank overdrafts
Total exposure
Tax effect @ 28%
Total exposure after tax
Current assetsOther current assetsBank and cash balances
Non-current liabilitiesInterest-bearing liabilitiesVendor loans payable
Current liabilitiesInterest-bearing liabilitiesVendor loans payableBank overdrafts
Total exposure
Tax effect @ 28%
Total exposure after tax
897,93127,719,494
(28,178,845)(60,634,835)
(8,394,783)(31,659,823)(81,286,586)
(181,537,447)
1,312,51145,624,329
(406,647)(22,126,127)
(326,303)(4,276,518)
(85,890,483)
(66,089,238)
17,959533,068
(563,577)(1,212,697)
(167,896)(633,196)
(1,625,732)
(3,652,071)
1,022,580
(2,629,491)
26,250912,487
(8,133)(442,523)
(6,526)(85,530)
(1,717,810)
(1,321,785)
370,100
(951,685)
(17,959)(533,068)
563,5771,212,697
167,896633,196
1,625,732
3,652,071
(1,022,580)
2,629,491
(26,250)(912,487)
8,133442,523
6,52685,530
1,717,810
1,321,785
(370,100)
951,685
897,93126,653,386
(28,178,845)(60,634,832)
(8,394,783)(31,659,823)(81,286,586)
(182,603,555)
1,312,51145,624,329
(406,647)(22,126,127)
(326,303)(4,276,518)
(85,890,483)
(66,089,238)
CarryingValue
R
Amountsubject to
riskR
Impact onProfit of 2%increase in
interest ratesR
Impact onProfit of 2%decrease in
interest ratesR
30.4 Interest Rate RiskThe group is exposed to interest rate fluctuations in respect of South African borrowing instruments. Fluctuations in interest rates impact on the group's exposure in this regard. It is the group's policy not to hedge its domestic interest rate exposure.
30.5 Credit RiskCredit risk arises from the risk that a counter party may default or not meet its obligations timeously. The group minimised its risk by ensuring that its counter parties are creditworthy institutions. If any doubt exists about the creditworthiness of a customer, arrangements will be made to obtain letters of credit. (Refer to note 7 for details).
Annual Report 2009
60
Related parties:
Related parties transactions:
Related parties balances:
Vegtu Investments (Pty) Ltd - Common directorsJQ Prosper CC - Common directors/membersSavillas Properties (Pty) Ltd - Common directorsRaylad Distributors CC -Common directors/membersAbrina 2950 (Pty) Ltd - Common directorsZAH Properties (Pty) Ltd - Close family memberRZT Zelpy 4534(Pty) Ltd - Common directorsKingsworthy Road Investments CC - Common directors/membersJava Capital(Pty) Ltd - Common directorsWilshire and Wilshire CC - Common directors/members
SalesPurchasesRent paidAdministration expensesListing and legal expensesListing expenses (included as part of the share premium)
There were no material balances at year end other than the loan with Wilshire and Wilshire CC (Refer to note 8).
4,853,9012,525,9364,268,0631,295,992
409,354-
2,244,2797,543,1308,261,0001,162,197
-3,014,820
30 April 2009
30 April 2008
RevenueProfits from operationsAssets
- Non-current - Current
Liabilities- Non-current- Current
759,713,15266,586,280
106,979,632406,598,332
48,253,069253,704,420
217,133,16223,143,209
151,489,34281,297,222
42,890,60915,832,667
976,846,31489,729,489
258,468,974487,895,554
91,143,678269,537,087
31. Related party information
32. Segmental Analysis
Group
Wholsesaledistribution of
consumer goods and services
R
Infrastructuralelectrification
R
Group total
R
2009R
2008R
Related parties include the subsidiary companies, shareholders and directors. During the year, the company entered into various transactions with related parties on an arms length basis.
No segmental analysis has been provided as the group operated as one segment (Wholesale distribution of consumer goods and services) during the period.
Ellies Holdings LTD
61
Shareholder Spreadas at 30 April 2009
Non-Public- Directors- Private companies
Public
Breakdown by classification:- Individuals- Nominee companies and trusts- Investment companies- Other corporate bodies
71421
12151236
10838264
7
1236
78,044,85245,253,749
123,298,601
123,340,300246,638,901
134,940,13476,364,32334,019,945
1,314,499
246,638,901
31.6418.3549.99
50.01100.00
54.7130.9613.79
0.54
100.00
71017
1,1561,173
922145
7531
1,173
19,156,548202,146,162221,302,710
12,223,379233,526,089
82,409,353110,826,163
20,465,29619,825,277
233,526,089
8.2043.7451.94
48.06100.00
35.2947.46
8.768.49
100.00
ER SalkowEllies Nominees (Pty)LtdBerrywood Investments 10 (Pty)LtdCredit Suisse Zurich
Financial Year end 30 AprilAnnual General Meeting 25 November 2009Announcement of interim results JanuaryAnnouncement of annual results JulyAnnual report posted October
61,963,89251,496,67615,000,000
128,460,568
15,947,709105,106,588
15,125,00012,167,921
148,347,218
25.1220.88
6.08
52.08
6.8345.01
6.485.21
63.53
2009
2009 2008
2008
No. ofholders
No. ofholders
No. ofshares
held
No. ofshares
held
% ofissuedcapital
No. ofshares
%Holding
No. ofshares
%Holding
% ofissuedcapital
According to the register of members of the company, the only shareholders registered as holding five percent or more of the company's shares, were the following:
Shareholders Diary
Annual Report 2009
62
Ellies Holdings LTD
63
Notice of Annual General Meeting
Notice is hereby given that the annual general meeting of shareholders of Ellies Holdings Limited (“Ellies” or “the company”) will be held at 94 Eloff Street Ext, Village Deep, Johannesburg 2001 on Wednesday, 25 November 2009 at 12:00pm for the following purposes:
?To consider the annual financial statements for the financial year ended 30 April 2009;
?To transact such other business as may be transacted at an annual general meeting of a company including the re-appointment of the auditors and re-election of retiring directors; and
?To consider and, if deemed fit, to pass, with or without modification, the special and ordinary resolutions set out below, in the manner required by the South African Companies Act, 1973, as amended:
Special resolution number 1: Share repurchases
“Resolved that the directors be authorised pursuant inter alia to the company's articles of association, until this authority lapses at the next annual general meeting of the company, unless it is then renewed at the next annual general meeting of the company and provided that this authority shall not extend beyond 15 months from date of passing this special resolution, for the company or any subsidiary of the company to acquire shares of the company, subject to the Listings Requirements of the JSE Limited (“JSE”) on the following bases:
?repurchases of shares must be effected through the order book operated by the JSE trading system, and done without any prior arrangement between the company and the counter-party;
?the company may only appoint one agent to effect repurchases on its behalf;
?the company (or subsidiary) must be authorised thereto by its articles of association;
?the number of shares which may be acquired pursuant to this authority in any financial year (which commenced 1 May 2009) may not in the aggregate exceed 20% (twenty percent) (or 10% where acquisitions are effected by a subsidiary) of the company's share capital as at the date of this notice of annual general meeting;
?repurchases of shares may not be made at a price more than 10% (ten percent) above the weighted average of the market value on the JSE of the shares in question for the five business days immediately preceding the repurchase;
?repurchases may not take place during a prohibited period (as defined in paragraph 3.67 of the JSE Listings Requirements) unless a repurchase programme (where the dates and quantities of shares to be repurchased during the prohibited period are fixed) is in place and full details thereof announced on SENS prior to commencement of the prohibited period;
?repurchases may only take place if, after such repurchase, the shareholder spread of the company still complies with the Listings Requirements of the JSE;
?after the company has acquired shares which constitute, on a cumulative basis, 3% (three percent) of the number of shares in issue (at the time that authority from shareholders for the repurchase is granted), the company shall publish an announcement to such effect, or any other announcements that may be required in such regard in terms of the Listings Requirements of the JSE which may be applicable from time to time; and
?the company's designated advisor shall confirm the adequacy of the company's working capital for purposes of undertaking the repurchase of shares in writing to the JSE prior to entering the market to proceed with the repurchase.”
In accordance with the Listings Requirements of the JSE, the directors record that:
Although there is no immediate intention to effect a repurchase of securities of the company, the directors would utilise the general authority to repurchase securities as and when suitable opportunities present themselves, which opportunities may require expeditious and immediate action.
The directors undertake that, after considering the maximum number of securities which may be repurchased and the price at which the repurchases may take place pursuant to the repurchase general authority, for a period of 12 months after the date of notice of this annual general meeting:
?the company and the group will be able in the ordinary course of business to pay their debts;
?the consolidated assets of the company and of the group fairly valued in accordance with generally accepted accounting practice, will exceed the consolidated liabilities of the company and of the group after the repurchase;
?the working capital, share capital and reserves of the company and of the group will be adequate for the purposes of the business of the company and its subsidiaries.
ELLIES HOLDINGS LIMITED (Incorporated in the Republic of South Africa) (Registration number 2007/007084/06) ISIN: ZAE000103081
JSE CODE: ELI
Annual Report 2009
64
The following additional information, some of which may appear elsewhere in the annual report of which this notice forms part, is provided in terms of paragraph 11.26 of the Listings Requirements of the JSE for purposes of this general authority:
?Directors – page 21
?Major beneficial shareholders – page 61
?Directors' interests in ordinary shares – page 29
?Share capital of the company – page 48
Litigation statement
The directors, whose names appear on page 21 of the annual report of which this notice forms part, are not aware of any legal or arbitration proceedings, including proceedings that are pending or threatened, that may have or have had in the recent past (being at least the previous 12 (twelve) months) a material effect on the group's financial position.
Directors' responsibility statement
Directors, whose names appear on page 21 of the annual report, collectively and individually accept full responsibility for the accuracy of the information pertaining to this special resolution and certify that, to the best of their knowledge and belief, there are no facts that have been omitted which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that the special resolution contains all information required in terms of the Listings Requirements of the JSE.
Material changes
Other than the facts and developments reported on in the annual report, there have been no material changes in the affairs or financial position of the company and its subsidiaries since the date of signature of the audit report for the year ended 30 April 2009 and up to the date of this notice.
Reasons for and effects of special resolution 1
The reason for Special Resolution 1 is to afford directors of the company or a subsidiary of the company general authority to effect a repurchase of the company's shares on the JSE. The effect of the resolution will be that the directors will have the authority, subject to the Rules and Requirements of the JSE, to effect acquisitions of the company's shares on the JSE.
Ordinary resolution number 1: Issue of shares for cash
“Resolved that the directors be authorised pursuant inter alia to the company's articles of association, until this authority lapses at the next annual general meeting of the company, unless it is then renewed at the next annual general meeting of the company provided that it shall not extend beyond 15 months, to allot and issue ordinary shares for cash subject to the Rules and Requirements of the JSE Limited (“JSE”) on the following bases:
?the allotment and issue of the shares must be made to persons qualifying as public shareholders as defined in the Listings Requirements of the JSE and not to related parties;
?the shares which are the subject of the issue for cash must be of a class already in issue, or where this is not the case, must be limited to such shares or rights that are convertible into a class already in issue;
?the number of shares issued for cash shall not in the aggregate in any one financial year exceed 50% (fifty percent) of the company's issued share capital of ordinary shares. The number of ordinary shares which may be issued shall be based on the number of ordinary shares in issue at the date of such application less any ordinary shares issued during the current financial year, provided that any ordinary shares to be issued pursuant to a rights issue (announced, irrevocable and fully underwritten) or acquisition (concluded up to the date of application including announcement of the final terms) may be included as though they were shares in issue at the date of application;
?the maximum discount at which ordinary shares may be issued is 10% (ten percent) of the weighted average traded price on the JSE of those shares over the 30 business days prior to the date that the price of the issue is agreed between the company and the party subscribing for the shares;
?after the company has issued shares for cash which represent, on a cumulative basis within a financial year, 5% (five percent) or more of the number of shares in issue prior to that issue, the company shall publish an announcement containing full details of the issue, (including the number of shares issued, the average discount to the weighted average traded price of the shares over the 30 days prior to the date that the price of the issue is determined and the effect of the issue on net asset value per share, net tangible asset value per share, earnings per share, headline earnings per share, and if applicable diluted earnings per share and diluted headline earnings per share), or any other announcements that may be required in such regard in terms of the JSE Listings Requirements which may be applicable from time to time”.
In terms of the Listings Requirements of the JSE a 75% (seventy-five percent) majority (excluding votes of the Designated Advisor and the controlling shareholders, together with their associates) of the votes cast by shareholders present or represented by proxy at the general meeting must be cast in favour of Ordinary Resolution Number 1 for it to be approved.
Ordinary resolution number 2: Unissued ordinary shares
“Resolved that the authorised and unissued ordinary share capital of the company be and is hereby placed under the control of the directors of the company which directors are, subject to the rules and regulations of the JSE Limited and the provisions of section 221 and section 222 of the Companies Act of 1973 as amended, authorised to allot and issue any of such shares at such time or times, to such person or persons, company or companies and upon such terms and conditions as they may determine, such authority to remain in force until the next annual general meeting of the company.”
Ellies Holdings LTD
65
Notice of Annual General Meeting - continued
Ordinary resolution number 3: Re-election of M.R. Goodford as a director of the company
“Resolved that M.R. Goodford be re-elected as a director of the company”
A brief curriculum vitae is set out in the annual report of which this notice forms part.
Ordinary resolution number 4: Re-election of R.H. Berkman as a director of the company
“Resolved that R.H. Berkman be re-elected as a director of the company”
A brief curriculum vitae is set out in the annual report of which this notice forms part.
Ordinary resolution number 5: Re-election of E.R. Salkow as a director of the company
“Resolved that E.R. Salkow be re-elected as a director of the company”
A brief curriculum vitae is set out in the annual report of which this notice forms part.
Ordinary resolution number 6: Re-appointment of auditors
“Resolved that PKF (Jhb) Inc be re-appointed as auditors of the company.”
Ordinary resolution number 7: Signature of documentation
“Resolved that any director or the company secretary of the company be and is hereby authorised to sign all such documentation and do all such things as may be necessary for or incidental to the implementation of Special Resolution number 1 and Ordinary Resolution numbers 1, 2, 3, 4, 5 and 6 which are passed by the members in accordance with and subject to the terms thereof.
Voting and proxies
A shareholder of the company entitled to attend and vote at the general meeting is entitled to appoint one or more proxies (who need not be a shareholder of the company) to attend, vote and speak in his/her stead.
On a show of hands, every shareholder of the company present in person or represented by proxy shall have one vote only. On a poll, every shareholder of the company present in person or represented by proxy shall have one vote for every share held in the company by such shareholder.
A form of proxy is attached for the convenience of any shareholder holding shares who cannot attend the annual general meeting. Forms
of proxy may also be obtained on request from the company's registered office. The completed forms of proxy must be deposited at or posted to the office of the transfer secretaries of the company, Link Market Services South Africa (Proprietary) Limited, 5th Floor, 11 Diagonal Street, Johannesburg 2001 (PO Box 4844, Johannesburg, 2000) to be received at least 48 hours prior to the meeting. Any member who completes and lodges a form of proxy will nevertheless be entitled to attend and vote in person at the general meeting should the member subsequently decide to do so.
Shareholders who have already dematerialised their shares through a Central Securities Depository Participant (“CSDP”) or broker rather than through own-name registration and who wish to attend the annual general meeting must instruct their CSDP or broker to issue them with the necessary authority to attend.
Dematerialised shareholders, who have elected own-name registration in the sub-register through a CSDP and who are unable to attend but wish to vote at the annual general meeting, should complete and lodge the attached form of proxy with the transfer secretaries of the company.
Dematerialised shareholders who have not elected own-name registration in the sub-register through a CSDP and who are unable to attend but wish to vote at the annual general meeting should timeously provide their CSDP or broker with their voting instructions in terms of the custody agreement entered into between the shareholder and his CSDP or broker.
By order of the board
Probity Business Services (Pty) LimitedCompany Secretary08 October 2009
Registered address 94 Eloff Street Ext, Village Deep,Johannesburg, 2001PO Box 57076, Springfield, 2137.
Transfer SecretariesLink Market Services South Africa (Pty)Limited 5th floor, 11 Diagonal Street, Johannesburg, 2001.PO Box 4844, Johannesburg, 2000.
Annual Report 2009
66
Directors for Re-election - CV's
Elliott Salkow began his career as a salesman and honed his entrepreneur skills early in South Africa and later in the United Kingdom. On returning to South Africa to sell television aerials for the then, Aerial King, where he was employed in-house at the company as a sales representative.
In 1979, he started Ellies and with great entrepreneurial spirit and flair, he soon recognized, exploited and created the opportunities. With his natural business instinct, mathematical mind and talent in delegation and motivation steadily grew the business from 5 staff to the business it is today in 30 years.
Today Ellie remains “hands-on” and involved in all aspects of the business. His instinct and experience remains a valuable asset to Ellies.
E.R. Salkow
Raymond worked at Woolworths as Department Manager for a number of years. He joined Ellies in 1980, where he brought with him the structures and techniques he learned and assisted in the creation of the foundation on which Ellies now stands. In 1985 he pioneered by establishing Ellies Cape Town as the first official branch of Ellies Electronics. He remains the force currently behind the continued success of the Western Cape region.
R.H. Berkman
Malcolm Goodford has had a career of twenty-three years in the IT industry. He joined Burroughs Computers as a trainee engineer in 1985 and attended a number of developmental programmes over the coming years. Since 1985, Malcolm held numerous senior positions with a number of major companies and worked abroad (Geneva and US) for a short while. These positions have ranged from technical roles through to senior jobs in sales and marketing. Malcolm left full-time employment to start his own business in 1998. The company he formed, MG and Associates is an executive search and niche recruitment and ICT consultancy.
M.R. Goodford
Ellies Holdings LTD
67
Notes
Annual Report 2009
68
Form of proxy for use by Ellies Ordinary Shareholders
For use by the holders of the company's certificated ordinary shares (“certified shareholders”) and/or dematerialised ordinary shares held through a Central Securities Depository Participant (CSDP) or broker who have selected “own name” registration (“own-name dematerialised shareholders”) at the annual general meeting of the company to be held on Wednesday, 25 November 2009 at 94 Eloff Street Ext, Village Deep, Johannesburg at 12:00pm, or at any adjournment thereof if required. Additional forms of proxy are available from the transfer secretaries of the company.
Not for use by holders of the company's dematerialised ordinary shares who have not selected “own-name” registration. Such shareholders must contact their CSDP or broker timeously if they wish to attend and vote at the annual general meeting and request that they be issued with the necessary authorisation to do so or provide the CSDP or broker timeously with their voting instructions should they not wish to attend the annual general meeting in order for the CSDP or broker to vote in accordance with their instructions at the annual general meeting.
I/We (Name in block letters)
of (Address)
Being the registered holder of ordinary shares in the capital of the company hereby appoint
1. or failing him
2. or failing him
3. the chairperson of the meeting
as my/our proxy to act for me/us on my/our behalf at the annual general meeting, or any adjournment thereof, which will be held for the purpose of considering and, if deemed fit, passing with or without modification, the ordinary and special resolutions as detailed in the notice of annual general meeting, and to vote for and/or against such resolutions and/or abstain from voting in respect of the ordinary shares registered in my/our name(s), in accordance with the following instructions:
To pass special resolution:1. To grant authority to effect share re-purchases
To pass ordinary resolutions:1. To grant authority to issue shares for cash2. To place the unissued shares under the control of the directors3. To re-elect M.R. Goodford as a director of the company4. To re-elect R.H .Berkman as a director of the company5. To re-elect E.R. Salkow as a director of the company6. To re appoint PKF (Jhb) Inc as auditors of the company7. To authorise the signature of documentation(indicate instructions to proxy in the spaces provided above.)
Unless otherwise instructed, my proxy may vote as he/she thinks fit
Signed this day of 2009
Signature Assisted by (if required)
In favour of AgainstNUMBER OF VOTES
Abstain
ELLIES HOLDINGS LIMITED JSE CODE: ELI(Incorporated in the Republic of South Africa) ISIN: ZAE000103081(Registration number 2007/007084/06)
Notes:
?Each shareholder is entitled to appoint one or more proxies (none of whom need be a shareholder of the company) to attend, speak and vote in place of that shareholder at the annual general meeting.
?Shareholder(s) that are certificated or own-name dematerialised shareholders may insert the name of a proxy or the names of two alternative proxies of the member's choice in the space/s provided, with or without deleting “the chairperson of the meeting”, but any such deletion must be initialled by the shareholder (s). The person whose name stands first on the form of proxy and who is present at the general meeting will be entitled to act as proxy to the exclusion of those whose names follow. If no proxy is named on a lodged form of proxy the chairperson shall be deemed to be appointed as the proxy.
?A shareholder's instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable by the shareholder in the appropriate box provided. Failure to comply with the above will be deemed to authorise the proxy, in the case of any proxy other than the chairperson, to vote or abstain from voting as deemed fit and in the case of the chairperson to vote in favour of the resolution.
?A shareholder or his/her proxy is not obliged to use all the votes exercisable by the shareholder, but the total of the votes cast or abstained may not exceed the total of the votes exercisable in respect of the shares held by the shareholder.
?Forms of proxy must be lodged at or posted to Link Market Services South Africa (Pty) Limitied, 5th Floor, 11 Diagonal Street, Johannesburg 2001 (PO Box 4844, Johannesburg, 2000) to be received not less than 48 hours prior to the meeting.
?The completion and lodging of this form of proxy will not preclude the relevant shareholder from attending the general meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such shareholder wish to do so. Where there are joint holders of shares, the vote of the first joint holder who tenders a vote, as determined by the order in which the names stand in the register of members, will be accepted.
?The chairperson of the general meeting may reject or accept any form of proxy which is completed and/or received otherwise than in accordance with these notes, provided that, in respect of acceptances, the chairperson is satisfied as to the manner in which the shareholder concerned wishes to vote.
?Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be attached to this form of proxy unless previously recorded by the company or the transfer secretaries or waived by the chairperson of the general meeting.
?Any alteration or correction made to this form of proxy must be initialled by the signatory/ies.
?A minor must be assisted by his/her parent guardian unless the relevant documents establishing his/her legal capacity are produced or have been registered by the transfer secretaries.
?Where there are joint holders of any shares, only that holder whose name appears first in the register in respect of such shares need sign this form of proxy.
Ellies Holdings LTD
69
Corporate Information
Annual Report 2009
70
Registered office
94 Eloff Street ExtVillage DeepJohannesburg, 2001
PO Box 57076Springfield, 2137
Telephone: 011 490 3800Fax: 011 493 2392Email: [email protected]
Designated advisor, corporate advisor,legal advisor and sponsor
Java Capital (Pty) Ltd(Company registration number: 2002/031862/07)(A sponsor registered with the JSE Limited)
2nd Floor, 2 Arnold Road, Rosebank, 2196.
PO Box 2087, Parklands, 2121
Auditors
PKF (Jhb) Inc
(Company registration number 1994/001166/21)
Registered Auditors
Chartered Accountants (SA)
42 Wierda Road WestWierda Valley,2196.
Private Bag X10046Sandton, 2146
DirectorsER Salkow (Chairman)WMG Samson (CEO)MF Levitt (CFO)RH BerkmanAC BrookingMR GoodfordMS MazwiRE Otto
Company secretary
Probity Business Services (Pty) Ltd
(Company registration number 2000/002046/07)
3rd Floor, The Mall Offices, 11 Cradock Avenue,Rosebank, 2196
PO Box 85392, Emmarentia, 2029
Transfer secretaries
Link Market Services South Africa (Pty) Ltd
(Company registration number 2000/007239/07)
5th Floor, 11 Diagonal Street, Johannesburg, 2001
PO Box 4844, Johannesburg, 2000
Commercial Bankers
The Standard Bank of SA Ltd
(Company registration number: 1962/000738/06)Standard Bank Centre, 5 Simmonds Street,
Johannesburg, 2001
PO Box 7725, Johannesburg, 2000
ELLIES HOLDINGS LIMITED(Incorporated in the Republic of South Africa)(Company registration number: 2007/007084/06)JSE Code: ELIISIN: ZAE000103081
15/1
0/2
009/1
322 G
PG
